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COOPERATIVE  MARKETING 


ITS  ADVANTAGES  AS  EXEMPLIFIED  IN 

THE  CALIFORNIA  FRUIT  GROWERS 

EXCHANGE 


BY 
W.  W.  CUMBERLAND,  Ph.D. 

Assistant  Professor  of  Economics,  University  of  Minnesota 

Manager  Markets  Information  Service,  Minnesota  Committee  of 

Food  Production  and  Conservation 


\ 


PRINCETON  UNIVERSITY  PRESS 
PRINCETON,  N.  J. 

LONDON: HUMPHREY  MILFORD 
OXFORD  UNIVERSITY  PRESS 

1917 


Copyright,  1917,  by 
Princeton  University  Press 

Published  October,  1917 
Printed  in  the  United  States  of  America 


PREFACE 

The  purpose  of  this  book  is  to  point  the  way  toward  a 
better  system  of  food  distribution.  The  history  of  the  co- 
operative movement  in  the  citrus  industry  of  CaHfornia 
demonstrates  by  achievement  the  possibihty  of  improve- 
ment over  the  ordinary  plan  for  getting  farm  products  to 
market.  In  the  cooperative  organizations  of  the  citrus  in- 
dustry marketing  machinery  has  been  developed  to  a  de- 
gree not  even  approximated  in  other  agricultural  industries. 
Organization  is,  in  fact,  the  characteristic  feature  of  the 
citrus  industry,  while  in  other  industries  it  is  usually  only 
an  insignificant  factor. 

Without,  therefore,  attempting  to  trace  the  history  of 
the.  movement,  the  text  analyzes  the  structure  of  the  co- 
operative associations  of  the  citrus  industry.  The  ordinary 
problems  that  face  the  cooperative  association  are  reviewed, 
problems  of  organization,  problems  of  internal  management, 
problems  of  relationship  to  other  similar  associations.  It 
is  hoped  that  an  accurate  picture  has  been  drawn  of  the 
actual  operation  of  the  series  of  organizations  that  form 
the  distributing  system  as  a  whole.  It  is  also  hoped  that 
persons  who  contemplate  organizing  a  cooperative  market- 
ing association  can  gain  from  the  present  analysis  a  satis- 
factorily comprehensive  view  of  the  difficulties  likely  to 
arise,  and  the  manner  in  which  a  successful  enterprise  has 
met  them. 

Citrus  literature  is  voluminous,  but  on  the  marketing  ar- 
rangements there  are  no  connected  accounts.  So  the  com- 
position of  this  treatise  was  attended  by  all  the  difficulties 


IV 


PREFACE 


of  breaking  a  new  trail,  and  the  results  are  subject  to  the 
deficiencies  almost  certain  to  appear  in  the  first  treatment 
of  any  problem.  The  only  work  that  even  remotely  re- 
sembles the  present  undertaking  is  Powell's  excellent  book, 
"Cooperation  in  Agriculture."  But  the  field  covered  by 
this  book  is,  as  its  name  implies,  far  wider,  and  the  treat- 
ment is  general  rather  than  intensive.  However,  as  Mr. 
Powell  is  General  Manager  of  the  California  Fruit  Growers 
Exchange,  he  bases  many  of  his  generalizations  on  the  con- 
ditions found  in  the  citrus  industry  and  takes  many  of  his 
illustrations  from  it.  Marketing  and  cooperation  receive 
but  scant  consideration  in  Coit's  "Citrus  Fruits,"  which  is, 
however,  by  far  the  best  account  that  has  been  published 
of  the  industry  as  a  whole. 

Though  printed  accounts  of  cooperative  efforts  in  the 
citrus  industry  are  almost  lacking,  there  is  a  considerable 
mass  of  lore  connected  with  the  exchange  system.  This 
I  have  tried  to  absorb  by  conversation  and  by  observation. 
For  many  of  the  statements  made  no  printed  authority  can 
be  cited,  but  many  of  the  assertions  in  the  text  are  based 
upon  papers,  pamphlets  and  reports  prepared  by  organiza- 
tions in  the  citrus  industry  for  their  own  information  and 
made  available  on  the  condition  that  no  direct  reference 
be  made  to  the  source  from  which  the  information  came. 

'  As  there  is  much  misunderstanding  about  the  exchange 
organization,  it  should  be  borne  in  mind  that  where  the 
word  "Exchange"  occurs  the  California  Fruit  Growers  Ex- 
change, a  corporation,  is  signified;  where  "exchange"  is 
used,  reference  is  to  the  whole  distributing  system,  com- 
posed of  local  associations,  district  exchanges  and  the 
California  Fruit  Growers  Exchange. 

The  author's  thanks  are  due  to  Professor  H.  R.  Mussey 
of  Columbia  University,  who  suggested  the  work  and  super- 
vised a  preliminary  draft;  to  Professors  F.  A.  Fetter  and 


PREFACE  V 

E.  W.  Kemmerer  of  Princeton  University,  both  of  whom 
read  the  manuscript  and  were  during  its  preparation  con- 
stant sources  of  advice;  and  to  the  following  gentlemen 
engaged  in  the  citrus  industry :  Mr.  F.  O.  Wallschlaeger, 
Secretary  of  the  Citrus  Protective  League,  who  answered 
queries  innumerable  and  placed  the  library  of  the  League 
at  the  writer's  disposal;  Mr.  P.  J.  Dreher,  Manager  of  the 
San  Antonio  Fruit  Exchange,  and  Mr.  D.  G.  Arbuthnot, 
Manager  of  the  La  Verne  Orange  Growers  Association, 
for  constant  courtesy  and  much  necessary  information,  and 
particularly  to  Mr.  G.  Harold  Powell,  General  Manager  of 
the  California  Fruit  Growers  Exchange,  whose  criticism 
of  the  manuscript  was  invaluable.  Finally,  to  my  father, 
Mr.  J.  F.  Cuml)erland,  whose  profound  knowledge  of  the 
citrus  industry  has  been  freely  drawn  upon,  my  thanks  are 
rendered.  For  efficient  aid  in  reading  the  proof  and  pre- 
paring the  index  thankful  acknowledgments  are  made  to 
my  wife.  W.  W.  C. 

January  2,  191 7. 


y 


CONTENTS 

PAGE 

Preface    iii 

Chapter  I 
Food    Distribution    as    a    Field    for    Cooperation    in 
Marketing    i 

Chapter  II 
Origin,  Extent  and  Nature  of  the  Citrus  Industry  in 
California    15 

Chapter  III 
Beginnings  of  Cooperative  Marketing  Among  Citrus 

Fruit  Growers 41 

Chapter  IV 
Democratic  Organization  of  the  Cooperative  Exchange     59 

Chapter  V 
Constitution   of   the   California   Citrus   Growers'   Ex- 
changes        79 

Chapter  VI 
Organization  of   Producers   in   the   California   Citrus 
Industry 92 

Chapter  VII 
The  Growers'  Selling  Agency 114 

Chapter  VIII 

The  Central  Exchange  of  the  Cooperative  Organiza- 
tion      131 

vii 


viii  CONTENTS 

Chapter  IX 
Value  of  the  Exchange  System,  Measured  by  Results 
in  California 147 

Chapter  X 
Benefits    of    Cooperation    for    Producers    Seeking    a 
Market  169 

Chapter  XI 

Affiliated    Cooperative    Organizations    in    the    Citrus 
Industry 189 

Chapter  XII 
Relation  of  Exchange  System  to  General  Marketing 

Problem   207 

Index 219 


COOPERATIVE  MARKETING 

CHAPTER  I 

FOOD  DISTRIBUTION  AS  A  FIELD  FOR  COOPERATION  IN 
MARKETING 

Within  the  last  century  there  have  been  numerous  at- 
tempts to  better  the  condition  of  toihng  humanity  by  various 
methods  of  cooperative  production  or  consumption,  and 
even  more  numerous  have  been  the  dreamers  who  perceived 
in  cooperation  a  panacea  for  all  human  ills,  if  only  their 
particular  system  could  be  made  universal.  But  the  mere 
fact  that  most  of  the  concrete  attempts  to  put  these  benefi- 
cent and  far  reaching  theories  into  practice  have  met  with 
indifferent  success  or  utter  failure  may  lead  some  of  us  to 
conclude  that  the  underlying  principles  themselves  are  un- 
sound. Schemes  for  phalanxes,  ateliers,  societies,  associa- 
tions, communities,  brotherhoods  have  at  various  times  been 
heralded  as  the  remedy  for  social  maladies.  Yet  the  death 
rate  among  such  proposals  has  always  been  high. 

However,  there  is  one  phase  of  cooperative  organization 
that  has  received  relatively  slight  consideration,  although 
theoretically  it  is  more  tenable  than  either  cooperative  pro- 
duction or  cooperative  buying  and  although  practically  it 
is  proving  itself  far  more  workable.  This  phase  is  coopera- 
tive marketing. 

Two  of  the  most  vital  issues  in  the  United  States  at  the 
present  time  are  the  increasing  cost  of  living  and  the  flow 
of  population  toward  the  cities.  The  causes  of  rising  prices 
are  fairly  obvious :    enormous  gold  production  accounting 


2  COOPERATIVE    MARKETING 

for  the  general  iiijward  tendency,  and  the  failure  of  the 
production  of  food  to  keep  pace  with  the  growth  of  jx^pula- 
tion  explaining  why  food  products  have  advanced  in  price 
even  more  rapidly  than  commodities  as  a  whole.  Growing 
scarcity  of  free  land  and  remorseless  exploitation  of  virgin 
soil  have  brought  it  about  that  food  can  be  produced  in 
sufficient  quantity  to  meet  the  ever  expanding  needs  of  our 
population  only  at  increasing  costs.  The  higher  prices 
which  the  farmer  receives  for  his  products  have  gradually 
been  capitalized  and  reflected  to  the  value  of  his  land. 
When  the  farmer  finds  that  he  can  sell  his  land  at  a  high 
figure  he  decides  to  move  to  town.  The  other  side  of  the 
picture  is  that  the  farmer's  sons  now  find  that  buying  land 
is  out  of  the  question,  and  they  too  move  to  town. 

It  follows  that  if  some  way  can  be  found  to  avoid  part 
of  the  expanse  of  placing  products  in  the  hands  of  con- 
sumers progress  will  be  made  in  solving  the  problem  of 
the  high  cost  of  living  and  also  that  of  the  cityward  tend- 
ency. Scientific  agriculture  is  making  a  brilliant  attack 
on  inefficient  methods  of  production,  sociologists  are  busy 
reconnoitring  the  human  aspects  of  the  rural  problem,  but 
thus  far  economists  have  given  but  meagre  assistance  to- 
ward overcoming  the  business  difficulties  of  the  farmer. 
Rural  credit  is  in  a  condition  far  from  satisfactory;  dis- 
tribution of  farm  products  is  haphazard ;  the  cost  of  the 
distributive  system,  if  we  can  dignify  it  with  the  name 
"system,"  is  unnecessarily  and  indefensibly  high. 

To  be  sure,  plans  are  from  time  to  time  proposed  for 
reducing  the  cost  of  living  by  facilitating  the  marketing 
of  food  products,  but  almost  without  exception  these  plans 
are  applicable  to  comparatively  unimportant  commodities 
or  to  limited  areas,  while  the  great  staples  which  absorb 
so  large  a  proportion  of  the  social  income  are  left  to  find 
their  way   to   market   in   the   old   aimless   and   expensive 


IN    FOOD    DISTRIBUTION  3 

fashion.  We  can  hardly  expect  a  ranchman  two  thousand 
miles  distant  from  the  city  which  consumes  his  products 
to  be  enthusiastic  over  the  opportunity  of  hauling  his  crops 
to  a  municipal  market.  The  home  hamper  plan  does  not 
appeal  to  the  man  accustomed  to  shipping  in  carload  lots. 
Consumers'  leagues  can  hardly  exert  a  profound  influence 
on  the  cotton  or  the  wheat  market  but  must  confine  their 
activities  in  the  main  to  package  goods.  Direct  selling  of 
most  kinds  is  wasteful  and  impossible  of  general  adoption. 

The  need  is  for  a  comprehensive  system  of  distribution, 
based  on  principles  of  efficiency,  capable  of  universal  appli- 
cation. Such  a  system  must  recognize  the  fact  that  inter- 
mediaries, such  as  jobbers  and  retailers,  perform  a  useful 
function  and  thus  that  they  will  continue  to  operate.  It 
must  recognize,  on  the  other  hand,  that  the  payments  to 
these  intermediaries  must  be  reduced,  that  their  proportion 
of  the  consumer's  price  must  be  diminished  if  producers 
are  to  be  encouraged  to  furnish  ample  supplies  to  the  public 
at  reasonable  prices. 

If  the  estimate  of  the  Department  of  Agriculture  is  ac- 
curate and  the  farmer  gets  only  about  half  of  the  con- 
sumer's dollar  which  is  spent  for  agricultural  products,  it 
is  indisputable  that  the  public  is  inflicting  an  injustice  upon 
itself.  It  is  not  getting  enough  food  for  a  given  expendi- 
ture of  money.  Bountiful  supplies  of  high  grade  food  are 
effectually  prevented  if  the  distributive  mechanism  is  so 
intricate  and  costly  that  food  products  can  only  be  sold  at 
high  rates.  People  cannot  afford  to  buy  large  quantities 
of  expensive  commodities,  no  matter  how  l^eneficial  the 
consumption  of  these  may  be;  hence,  if  demand  is  curtailed 
l^y  lack  of  general  purchasing  power,  there  will  be  attendant 
curtailment  (jf  production,  prevention  of  consumption  of 
beneficial  products  and  impairment  of  social  welfare. 

One  of  the  most  perplexing  problems  that  confront  the 


4  COOPERATIVE    MARKETING 

social  reformer  is  that  of  insufficient  nourishment.  Booth 
and  Rowntree  in  their  justly  celebrated  surveys  came  to 
the  conclusion  that  about  one-tenth  of  the  industrial  popula- 
tion studied  does  not  obtain  enough  food  to  secure  mere 
working  efficiency.^  Chapin,  More  and  Streightoff  give 
concretely  the  income  which  is  necessary  under  modern 
conditions  for  the  maintenance  of  a  decent  standard  of 
family  living." 

Most  writers,  however,  see  only  one  remedy,  increased 
earnings.  But  increased  earnings  imply  a  readjustment  of 
the  general  economic  situation  which  determines  wages. 
This  readjustment  is  not  to  be  obtained  by  even  the  widest 
diffusion  of  knowledge  of  the  fact  that  large  numbers  of 
people  are  underfed.  Some  dynamic  element  is  needed, 
such  as  a  change  in  the  ratio  of  numbers  to  natural  re- 
sources or  an  increase  in  working  efficiency.  Such  general 
readjustments  for  the  welfare  of  labor  are  most  difficult  of 
accomplishment.  If  workmen  were  able  to  increase  their 
wages  they  would  do  so  without  waiting  to  be  told  that 
their  earnings  are  inadequate. 

Bitter  strikes  have  been  waged  over  smaller  matters  than 
an  eight  per  cent,  advance  in  earnings,  yet  the  wage  earner 
would  receive  an  advantage  equivalent  to  an  eight  per  cent, 
increase  in  wages  if  the  intricacies  of  getting  his  food  to 
him  could  be  sufficiently  straightened  out  to  effect  a  saving 
of  twenty  per  cent.  For  it  must  be  remembered  that  in- 
vestigators agree  that  more  than  two-fifths  of  the  working- 
man's  total  earnings  is  spent  for  food.     Under  our  present 

1  Booth:  "Life  and  Labour  of  the  People  in  London,"  Vol.  II,  pp. 
18-24;  Rowntree:     "Poverty,"  pp.  111-118. 

2  Chapin :  "The  Standard  of  Living  Among  Workingmen's  Fam- 
ilies in  New  York  City,"  pp.  68-69,  123-161,  229-234,  245-250;  Streight- 
off :  "The  Standard  of  Living  Among  the  Industrial  People  of  Amer- 
ica," Chapters  II,  IV,  and  XI;  More:  "Wage-Earners'  Budgets,"  pp. 
264-270. 


IN    FOOD    DISTRIBUTION  5 

arrangements  the  retailer  is  unable  to  effect  this  simplifica- 
tion. With  heavy  overhead  charges  and  a  relatively  small 
business  he  is  compelled  to  make  what  seems  to  be  an 
exorbitant  profit  on  every  transaction  in  order  to  maintain 
himself.  To  be  sure,  he  renders  services  in  the  form  of 
convenience  and  individual  accommodation  which  enable 
him  to  add  one-third  to  one-half  to  the  prices  which  he 
pays  the  wholesaler;^  but  if  these  services  and  that  con- 
venience were  not  demanded  by  the  consuming  public  he 
would  be  unable  to  make  this  large  addition  to  wholesale 
prices.  Still,  if  these  services  could  be  integrated  and  or- 
ganized in  a  systematic  manner  it  is  easily  conceivable  that 
they  might  be  furnished  at  much  smaller  costs.  With  the 
accomplishment  of  this  economy  would  come  also  a  vast 
increase  in  social  welfare  without  a  corresponding  social 
loss.  Few  men  would  be  thrown  out  of  employment ;  little 
capital  value  would  be  destroyed,  and  a  limited  measure  of 
readjustment  would  suffice. 

One  large  difficulty  which  the  small  independent  retailer 
seems  unable  to  overcome  is  that  of  handling  advantageously 
perishable  products  of  second  and  third  qualities,  those 
qualities  which  the  vast  bulk  of  our  population  might  rea- 
sonably be  expected  to  buy.  On  first  grade  qualities  the 
retailer  can  add  a  handsome  percentage,  enough  to  cover 
his  heavy  expenses  and  large  risks  of  loss  through  de- 
terioration, and  still  consumption  will  not  be  curtailed  ap- 
preciably. To  the  classes  that  buy  "fancy"  grades  a  price 
of  a  little  more  or  a  little  less  is  a  matter  of  relative  in- 
difference. But  it  is  quite  otherwise  in  the  case  of  "stand- 
ard" grades.  The  large  consuming  public  which  is  unable 
to  buy  the  best  grades  of  commodities  refuses  to  take  the 

3  King :  "Can  the  Cost  of  Distributing  Food  Products  be  Reduced  ?" 
in  Annals  of  the  American  Academy  of  Political  and  Social  Science, 
Vol.  XLVIII,  pp.  199-224. 


6  COOPERATIVE    MARKETING 

lower  grades  unless  the  prices  are  very  attractive.  The 
principle  is  the  same  as  that  which  governs  the  prices  of 
second  hand  articles:  no  matter  if  they  contain  practically 
as  many  uses  as  new  articles,  they  will  be  taken  only  at  a 
heavy  discount.  And  it  is  impossible  for  the  ordinary  re- 
tailer, catering  to  a  widely  fluctuating  demand,  to  quote 
these  inviting  prices.  So  he  resigns  himself  to  the  policy 
of  a  few  sales  at  high  profits  rather  than  numerous  sales 
on  a  narrow  margin.  As  a  result  many  of  those  who  would, 
to  their  own  great  physical  improvement,  consume  enor- 
mous quantities  of  fresh  produce  of  the  second  and  third 
qualities  at  present  consume  very  small  amounts  of  fruits 
and  vegetables  because  of  their  inability  to  obtain  anything 
but  first  grade  commodities  or  lower  grades  only  at  rela- 
tively high  prices. 

The  effect  of  this  situation  is  threefold  :  ( i )  consumers 
suffer  through  the  failure  to  obtain  a  properly  balanced 
diet;  (2)  producers  suffer  through  inability  to  market  large 
portions  of  their  crops,  for  there  are  alwa3^s  more  small 
apples  than  large;  (3)  society  as  a  whole  suffers  through 
the  waste  of  commodities  which,  under  a  less  expensive 
distributive  system,  would  have  an  economic  value.  There 
is  no  market  for  small  apples  at  four  cents  a  pound,  but 
at  one  cent  a  pound  the  demand  would  be  enormous.  ]\Iore- 
over,  apples  to  any  amount  can  be  grown  for  one  cent  a 
pound,  but  under  the  present  system  the  price  is  two  cents 
a  pound  or  more  by  the  time  the  consumer  is  reached,  and 
in  all  probability  demand  is  reduced  by  three-fourths. 

It  was  through  observing  the  fact  that  peaches  on  the 
Los  Angeles  market  were  at  one  time  selling  at  five  cents 
a  pound  while  forty  miles  distant  they  were  selling  in  the 
orchard  at  $2.50  a  ton  or  154  mills  a  pound  that  the  present 
writer  became  interested  in  the  marketing  problem.  De- 
velopments in  the  technique  of  production  have  obviously 


IN    FOOD    DISTRIBUTION  7 

outstripped  those  in  methods  for  getting  products  into  the 
hands  of  consumers,  just  as  in  political  and  social  life  the 
machinery  sometimes  seems  inadequate  for  the  tasks  it  is 
supposed  to  perform.  Thus  far  no  one  has  come  forward 
with  a  comprehensive  plan  for  remodelling  the  marketing 
machinery,  though  of  course  practicable  suggestions  for 
improving  minor  parts  are  from  time  to  time  offered.  In- 
deed it  is  highly  improbable  that  the  mechanism  can  be 
completely  reconstructed  as  long  as  producers  prefer  a 
starved  individualism  to  a  well  fed  cooperation  between 
themselves  and  with  marketing  agencies,  and  as  long  as 
consumers  have  an  unreasoning  terror  of  such  combina- 
tions and  associations  as  are  essential  to  efficiency  in 
marketing. 

So  the  problem  is  more  than  that  of  devising  proper 
mechanical  methods  for  the  economical  distribution  of  food 
products.  Men  as  well  as  things  must  be  made  to  act  in 
a  different  manner,  and  to  readjust  men's  habits  is  not  a 
trifling  undertaking.  If  the  course  of  civilization  for  five 
thousand  years  has  been  unable  to  impress  upon  men's 
minds  the  advantages  of  working  together  for  the  accom- 
plishment of  common  ends  there  is  little  likelihood  that  the 
exhortation  of  any  social  reformer  will  bring  it  about  at 
a  moment's  notice.  Just  at  this  point  many  otherwise  ir- 
reproachable schemes  break  down.  They  depend  for  their 
success  upon  the  contingency  that  men  become  rational  or 
loyal  or  unsuspicious  or  honest  or  upon  some  other  hypo- 
thetical condition.  The  "economic  man"  has  fallen,  and 
plans  of  social  amelioration  that  rest  on  the  presupposition 
that  the  individual  recognizes  and  pursues  his  economic 
interests  to  the  exclusion  of  other  considerations  are  des- 
tined to  remain  unrealized. 

Until  recently  American  farmers  have  been  unconscious 
of  and  unaffected  by  those  socializing  forces  which  have 


8  COOPERATIVE    MARKETING 

enabled  business  men  so  successfully  to  combine  for  com- 
mon undertakings.  Business  men  unite  to  overcome  the 
larger  obstacles  which  confront  them;  farmers  still  try  to 
meet  their  problems  single  handed.  Business  methods  make 
possible  the  Pennsylvania  Railroad  and  the  United  States 
Steel  Corporation ;  the  methods  of  farmers  engender  in- 
efficiency and  stagnation. 

Essentials  for  a  successful  plan  in  simplifying  the  market- 
ing situation  are:  (i)  it  must  not  be  based  on  self-interest 
alone;  (2)  it  must  not  expect  unduly  to  alter  long  estab- 
lished customs;  (3)  it  must  be  based  on  principles  of  effi- 
ciency, involving  some  sort  of  concerted  action  on  the  part 
of  producers. 

Cooperative  marketing  to  a  large  extent  is  in  harmony 
with  these  three  principles.  A  properly  managed  coopera- 
tive association  can  make  a  powerful  appeal  to  a  producer's 
self-interest.  He  can  be  shown  that  if  a  large  enough  pro- 
portion of  producers  consent  to  work  together  the  possi- 
bilities for  gain  are  greater  when  he  unites  his  efforts  with 
those  of  others  than  when  he  operates  independently.  In 
addition  he  is  offered  the  opportunity  of  becoming  a  part 
of  a  social  organization.  This  aspect  of  cooperation  is 
often  neglected,  but  students  of  society  agree  that  a  man 
inherently  desires  to  belong  to  some  kind  of  social  group, 
a  club,  a  college,  a  lodge,  a  grange  or  a  trade  union.  He 
can  be  made  to  feel  that  he  is  an  essential  part  of  something 
larger  than  himself.  Thus  loyalty  is  engendered,  toleration 
fostered  and  breadth  of  view  developed. 

Neither  does  cooperative  marketing  depend  for  its  suc- 
cess on  changing  the  habits  of  consumers.  It  recognizes 
that  the  ordinary  purchaser  of  food  will  continue  indefi- 
nitely to  send  in  an  order  or  go  to  the  corner  grocery  to 
procure  daily  supplies,  even  though  it  may  be  incontro- 
vertibly  demonstrated  that  economies  might  be  effected  by 


IN    FOOD    DISTRIBUTION"  9 

joining  a  housewives'  league  or  patronizing  some  distant 
public  market.  Improvements  in  retail  distribution  will 
undoubtedly  be  worked  out,  but  they  must  come  through 
the  organized  effort  of  consumers  expressing  itself  through 
voluntary  associations  and  through  political  organizations 
which  have  as  their  purpose  the  assumption  by  cities  of 
control  of  the  broader  aspects  of  the  final  stages  of  food 
distribution,  such  as  minimum  standards  of  quality,  honest 
weights,  adequate  and  convenient  terminal  facilities,  un- 
manipulated  public  auctions  and  licensed  commission  mer- 
chants. 

Business  methods  for  farmers  are  essential  if  agricul- 
tural producers  are  to  retain  their  relative  position  in  our 
broader  national  economy.  Business  methods  imply  spe- 
cialization of  function.  The  farmer  who  best  understands 
the  technical  processes  for  raising  potatoes  or  wheat  may 
be  a  poor  salesman.  His  lack  of  bargaining  ability  is  prac- 
tically always  combined  with  profound  ignorance  of  the 
general  market  situation.  All  he  ordinarily  knows  about 
what  price  to  demand  for  his  product  is  gained  from  those 
who  are  offering  to  buy.  He  is  innocent  of  adequate  knowl- 
edge of  what  is  going  on  in  competing  areas  of  production 
all  over  the  world.  His  ideas  of  the  most  advantageous 
times  for  offering  his  product  are  vague.  In  short,  the 
fanner's  marketing  perspective  is  necessarily  local,  while 
marketing  efficiency  requires  specialized  skill,  extensive  in- 
formation and  a  perspective  international  in  scope. 

Business  methods  also  imply  the  ability  to  coml)ine  with 
others  for  attaining  desirable  ends,  impossible  of  realiza- 
tion by  any  individual.  The  farmer  by  his  own  efforts  is 
not  able  to  ()l)tain  sufficient  market  information  for  the 
intelligent  disposal  of  his  crops.  Nor  could  he  advan- 
tageously use  such  information  even  if  it  were  available. 
But  a  group  of  farmers  can  afford  to  develop  an  elaborate 


lo  COOPERATIVE    MARKETING 

market  report  service  and  then  realize  the  full  benefit  from 
this  information  by  delegating-  marketing  authority  to  some 
man  or  group  of  men  occupied  wholly  with  the  selling  and 
not  the  production  of  commodities.  The  selling  department 
can  also  turn  attention  to  the  time  element  as  well  as  to 
place  distribution,  and  by  delaying  or  expediting  shipments 
a  rational  instead  of  a  fortuitous  distribution  can  be  ef- 
fected. Of  what  value  to  the  ordinary  farmer  would  be 
the  knowledge  that  better  prices  could  be  secured  by  re- 
tarding his  sales?  He  is  under  compulsion  to  ship  within 
narrowly  circumscribed  time  limits  or  allow  his  crops  to 
deteriorate.  An  organization,  however,  can  provide  an  ele- 
vator or  a  warehouse  or  a  cold  storage  plant  and  make 
itself  relatively  independent  of  the  necessity  of  immediate 
marketing.  It  would  be  folly  for  an  individual  to  install 
such  an  equipment,  but  a  group  can  command  the  credit 
for  the  physical  plant,  the  financial  stake  of  any  individual 
is  not  an  oppressive  item,  and  his  share  of  the  expense  is 
small,  yet  the  possibility  of  profits  from  storing  his  products 
for  a  more  favorable  market  is  as  great  as  though  he  indi- 
vidually possessed  storage  facilities. 

The  expression  "cooperative  marketing"  is  used  in  two 
quite  dissimilar  significations:  (i)  It  may  apply  to  united 
activity  on  the  part  of  producers,  usually  manufacturers, 
and  distributors,  such  as  retailers,  for  the  sale  of  a  given 
commodity.  Obviously  this  form  of  cooperative  marketing 
has  nothing  to  do  with  cooperation  among  the  producers 
themselves.  It  may  best  be  illustrated  by  the  frequent  usage 
of  manufacturers  of  specialties  who  include  the  names  of 
local  dealers  in  the  advertisements  sent  out  by  the  factory. 
(2)  The  second  meaning  is  that  with  which  we  shall  be 
concerned.  It  signifies  the  cooperation  of  individual  pro- 
ducers or  groups  of  producers  for  the  marketing  of  prod- 
ucts.    Nothing  is  implied  in  regard  to  cooperation  between 


IN    FOOD    DISTRIBUTION  ii 

these  associated  producers  and  the  ordinary  agencies  of 
distribution,  though  such  cooperation  may  exist. 

Even  in  the  second  sense,  however,  the  term  "coopera- 
tion" has  several  meanings.  For  instance,  it  sometimes 
refers  to  voluntary  unincorporated  organizations,  some- 
times to  capital  stock  associations  of  producers,  sometimes 
to  corporations  formed  under  State  laws  which  permit 
non-profit  organizations  without  capital  stock.  When  the 
form  of  association  is  the  ordinary  stock  corporation  it  is 
evident  that  through  the  sale  of  shares  ownership  in  the 
so-called  producers'  organization  may  pass  to  non-producers 
whose  interest  in  the  corporation  rests  on  expected  divi- 
dends from  stock  which  they  hold  rather  than  from  econ- 
omies in  the  handling  of  their  crops.  Mr.  Powell's  caution 
as  to  the  application  of  the  term  is  therefore  pertinent : 

A  cooperative  organization,  therefore,  is  not  a  corpora- 
tion in  which  the  capital  is  contributed  primarily  in  order 
that  it  may  earn  a  profit;  nor  one  composed  of  producers 
and  non-producers ;  nor  one  in  which  the  producer's  product 
is  handled  by  a  corporation  for  the  benefit  of  the  stock- 
holders rather  than  for  that  of  the  members;  nor  one  in 
which  the  membership  is  not  under  the  control  of  the  or- 
ganization; nor  one  in  w'hich  the  members  do  not  actually 
control  the  organization.  It  is  an  association  of  farmers 
who  unite  in  an  effort  to  handle  their  common  interests 
through  an  agency  which  is  controlled  by  them  on  the 
principles  of  an  industrial  democracy,  and  exclusively  for 
their  benefit.* 

The  principles  on  which  cooperation  among  producers 
for  the  common  marketing  of  their  products  is  based  are 
few  and  simple.  While  a  living  and  developing  form  of 
social  and  economic  organization  is  incapable  of  being 
neatly  classified   and   pigeonholed,   some   attempt  must   be 

*  Powell :  "Fundamental  Principles  of  Cooperation  in  .Agriculture"; 
University  of  California,  College  of  Agriculture,  Circular  No.  123,  p.  2. 


12  COOPERATIVE    MARKETING 

made  toward  an  enumeration  of  the  salient  features  of 
cooperative  marketing.  However,  it  must  not  be  inferred 
that  any  of  the  statements  to  be  made  apply  indiscrimi- 
nately to  all  such  organizations.  Practically  no  two  are 
exactly  alike,  and  this  is  proper.  Different  local  conditions 
arc  to  be  met,  different  products  are  to  be  marketed,  dif- 
ferent types  of  cooperating  individuals  are  to  be  combined. 
A  form  of  organization  suitable  for  marketing  wheat  might 
be  quite  inappropriate  for  handling  strawberries.  Some 
associations  deal  only  with  marketing,  as  such;  some  add 
to  this  function  preparation  of  the  product  for  marketing; 
some  further  concern  themselves  with  storage;  some  even 
exercise  more  or  less  control  over  the  manner  in  which  the 
crop  is  produced. 

In  agricultural  cooperative  marketing  the  crop  is  pro- 
duced individually  but  assembled  and  sold  collectively. 
Proceeds  of  sales  are  apportioned  according  to  some  speci- 
fied agreement.  Two  chief  methods  obtain  for  the  division 
of  proceeds:  (i)  The  selling  department  keeps  the  product 
of  each  cooperator  separate  and  sells  it  on  individual  ac- 
count. Or  at  least  the  proceeds  due  any  cooperator  are 
calculated  on  the  price  obtained  for  his  particular  shipment, 
though  shipments  by  other  cooperators  may  be  included  in 
the  same  sale,  if  one  man's  shipment  is  not  large  enough 
to  supply  the  demands  of  the  purchaser.  (2)  Much  more 
common  is  the  method  of  pooling  the  products  of  the  sev- 
eral members  and  prorating  the  proceeds.  Each  plan  has 
advantages  and  disadvantages. 

Another  essential  of  cooperative  marketing  is  that  there 
shall  be  democratic  control.  Whether  the  "one  man,  one 
vote"  plan  should  be  unqualifiedly  adopted  is  questionable, 
but  there  is  little  likelihood  of  success  unless  each  member 
feels  a  personal,  vital  interest  in  the  enterprise.  To  assure 
this  interest  it  is  essential  that  no  individual  or  small  group 


IN    FOOD    DISTRIBUTION  13 

of  individuals  because  of  preponderating  importance  in  the 
organization  should  cause  it  to  become  a  miniature  despo- 
tism or  oligarchy.  If  any  member  feels  that  his  influence 
or  power  in  the  association  is  so  insignificant  that  he  is  in 
no  way  able  to  affect  its  general  policy  he  is  quite  likely  to 
sever  his  connection  with  it.  Conservatism  and  "safety 
first"  are  principles  ingrained  in  farmers.  And  the  average 
producer  is  not  going  to  entrust  his  means  of  livelihood  to 
an  agency  over  which  he  has  no  control,  even  if  it  offers 
an  apparent  advantage  in  the  disposition  of  his  crops. 

Although  a  society  for  marketing  may  come  within  the 
definition  of  a  cooperative  organization  and  still  pay  divi- 
dends on  stock,  the  practice  is  fraught  with  danger.  Enough 
promising  associations  have  succumbed  to  the  dividend 
malady  to  justify  postulation  of  a  non-profit  basis  as  one 
of  the  principles  of  real  marketing  cooperation. 

A  point  which  has  received  relatively  slight  consideration 
in  most  expositions  of  cooperation,  but  which  seems  of 
especial  importance,  is  what  might  be  termed  "competitive 
cooperation."  There  is  practical  unanimity  of  conviction 
among  economic  thinkers  that  efficient  production  requires 
the  spur  of  self-interest.  On  this  ground  the  defence  of 
private  property  is  most  frequently  and  most  logically 
based.  So  far,  advocates  of  socialism  and  cooperative 
effort  of  various  forms  have  failed  to  convince  the  majority 
of  thinkers  that  their  schemes  offer  substitutes,  equivalent 
in  motivating  force,  for  private  property  and  competition. 
Therefore  if  a  cooperative  plan  can  be  made  to  include  those 
features  of  beneficial  competition  which  are  believed  so 
largely  to  have  formed  the  basis  of  economic  progress  it 
can  enlist  the  adherents  of  a  much  wider  group  of  thinkers 
than  would  otherwise  be  the  case.  Still  more  important, 
the  history  of  cooperative  enterprises  declares  in  unmis- 
takable terms  that  the  principles  of   brotherhood  do  not 


14  COOPERATIVE    MARKETING 

constitute  an  adequate  ground  structure  for  persistent  and 
effective  industrial  effort.  In  fact,  at  the  present  stage  of 
social  evolution  idealistic  aspirations  for  an  economic  or- 
ganization based  on  unalloyed  altruism  must  come  under 
the  hegemony  of  possibly  more  sordid  but  unquestionably 
more  powerful  self-interest.  Cooperative  marketing  can 
be  made  to  fulfil  this  condition,  and  in  that  fact  lies  its 
inherent  strength. 


CHAPTER  II 

ORIGIN,  EXTENT  AND  NATURE  OF  THE  CITRUS  INDUSTRY 
IN  CALIFORNIA 

Before  we  can  consider  cooperative  marketing  as  exem- 
plified in  the  citrus  industry  in  California,  it  is  necessary 
to  enter  into  a  somewhat  elaborate  description  of  the  in- 
dustry itself.  The  ideas  of  many  people  in  regard  to  orange 
and  lemon  culture  in  California  are  not  only  vague  but  to 
no  small  extent  erroneous. 

Statements  in  regard  to  the  extent  of  the  industry,  the 
cultural  processes  and  the  methods  of  packing  and  shipping 
must  not  be  accepted  as  making  a  pretense  to  comprehen- 
siveness. Differences  of  opinion  might  conceivably  arise 
from  every  separate  statement  concerning  growing,  pack- 
ing and  shipping,  and  yet  the  sum  of  the  statements  here 
given  might  leave  on  the  whole  an  accurate  idea  of  the  in- 
dustry as  actually  conducted.  Hence  all  statements  are 
intended  to  be  merely  typical  and  not  exhaustive,  for  it 
must  be  remembered  that  in  each  branch  of  the  industry 
there  are  almost  as  many  different  methods  as  there  are 
individual  growers,  packers  and  shippers.  Moreover,  con- 
ditions are  so  variable  in  the  different  producing  areas  that 
a  statement  which  might  be  true  for  one  locality  could  be, 
and  often  is,  entirely  inapplicable  in  another.  Further  to 
simplify  the  situation  it  must  be  remembered  that  all  of 
the  points  to  be  presented  apply  indiscriminately  to  both 
oranges  and  lemons,  unless  otherwise  specified,  and  that 
the  phrase  "citrus  industry"  as  used  in  California  signifies 
primarily  oranges  and  lemons,  for  very  few  pomelos  (grape- 
fruit), limes  or  citrons  are  produced. 

IS 


l6  COOPERATIVE    MARKETING 

California,  throughout  the  period  of  her  settlement  and 
development  l)y  European  stocks,  has  been  a  land  pic- 
turesque and  romantic.  From  the  voyage  of  Drake  and  the 
days  of  the  Franciscan  fathers  under  Junipero  Serra  down 
to  the  "Forty-niners,"  her  history  has  been  tinged  with 
more  than  ordinary  fascination  and  romance.  As  formerly 
she  was  known  as  the  land  of  gold,  so  now  is  California 
almost  as  broadly  known  as  the  land  of  the  golden  orange. 
And  the  story  of  the  yellow  fruit  is  little  less  dramatic  than 
that  of  the  yellow  metal. 

Oranges  were  first  introduced  into  California  by  the 
padres  in  the  latter  half  of  the  eighteenth  century.  Even 
yet  some  of  the  trees  from  these  early  plantings  can  be  seen 
around  the  ruins  of  the  old  missions.  Of  course,  all  of 
the  oranges  of  this  early  period  were  of  seedling  varieties, 
the  seeds  having  come  from  Spain  by  way  of  Mexico  and 
Lower  California. 

By  1850,  by  reason  of  seeds  and  trees  obtained  from  the 
missions,  the  orange  came  to  be  a  relatively  common  garden 
tree,  and  besides  there  had  been  planted  the  first  commer- 
cial orchard,  the  famous  Wolfskill  grove,  situated  on  w^hat 
is  now  the  commercial  centre  of  Los  Angeles.  By  1875 
numerous  small  plantings  at  Los  Angeles,  Pasadena,  San 
Bernardino,  Riverside  and  San  Diego  had  shown  that  the 
soil  and  climate  of  California  were  peculiarly  suitable  for 
the  production  of  citrus  fruits.  But  these  early  experi- 
ments only  showed  possibilities.  Orange  growing  on  an 
extensive  scale  was  out  of  the  question  for  want  of  a  mar- 
ket. For  it  must  be  recalled  that  southern  California  had 
no  railroad  connections  until  1876,  when  the  Southern 
Pacific  extended  its  line  from  San  Francisco  to  Los  Angeles. 
Thus  the  industrial  era  of  producing  citrus  fruits  may  not 
imreasonably  be  dated  at  1877,  when  the  first  carload  of 
oranges  left  the  Wolfskill  grove  for  the  East.^ 

1  Coit :     "Citrus  Fruits,"  pp.  1-5. 


IN    THE    CITRUS    INDUSTRY  17 

These  pioneer  experiments  with  seedhng  varieties  were, 
however,  destined  to  be  thrown  into  obscurity  by  the  intro- 
duction of  an  infinitely  superior  seedless  variety,  now  known 
the  w'orld  over  as  the  Washington  navel.  The  common 
orange  is  probably  a  native  of  the  south  of  China,  and 
spread  thence  to  India,  Arabia  and  Syria.  Europe  first 
became  familiar  with  it  in  the  fifteenth  century.  At  present 
there  are  eighty  more  or  less  distinct  varieties  of  oranges, 
but  all  of  these  are  derived  from  the  sweet  and  bitter 
oranges  of  China." 

Our  first  description  of  navel  oranges  was  written  in  the 
seventeenth  century.  But  it  is  not  from  the  navel  varieties 
of  Europe  that  the  Washington  navel  is  derived.  At  an 
early  date  in  Brazil's  history  oranges  w-ere  transplanted 
thither  from  Portugal.  According  to  information  gathered 
by  an  expedition  sent  to  Brazil  in  191 3  by  the  United  States 
Department  of  Agriculture  there  is  a  tradition  among  the 
Portuguese  orange  growers  of  Bahia,  Brazil,  that  about 
1820  a  bud  sport  appeared  on  the  seedless  variety  known 
locally  as  the  laranja  selecta.  The  sport  was  found  to  be 
seedless,  of  unusual  size  and  of  superior  quality.  A  grower 
at  Bahia  propagated  buds  from  this  sport  and  developed 
a  variety  known  locally  as  the  laranja  selecta  de  umbigo 
and  internationally  as  the  "Bahia."^ 

In  1869  the  attention  of  William  Saunders,  superintend- 
ent of  the  propagating  gardens  at  Washington,  D.  C,  was 
directed  to  the  existence  of  this  superior  variety  of  orange 
at  Bahia.  Immediately  he  sent  to  Bahia  and  procured 
twelve  newly  budded  trees.  These  he  established  in  the 
grounds  at  Washington  and  set  about  propagating  other 
trees  for  distribution  by  means  of  buds  from  the  original 
importation. 

-  The  Packer:    "The  Orange  Historically,"  May  14.  1910. 
3  Shamel :     "The   Washington   Navel   Orange,"  in   Riverside  Enter- 
prise, May  20,  1915. 


i8  COOPERATIVE    MARKETING 

One  of  the  prospective  settlers  of  the  new  colony  of 
Riverside,  California,  was  Mrs.  L.  C.  Tibbetts.  Before 
starting  West  she  was  inspecting  the  orangery  at  Wash- 
ington, and  Mr.  Saunders  offered  to  give  her  two  of  the 
Bahia  trees  to  take  to  her  new  home.  She  accepted  the 
offer  and  planted  the  first  Bahia  navel  orange  trees  in 
California  in  1873.  From  this  time  a  new  era  opens  in 
California  citrus  culture.  As  soon  as  the  trees  came  into 
bearing  the  marked  superiority  of  this  fruit  over  other  navel 
varieties,  known  indiscriminately  as  Australian,  became  evi- 
dent. There  was  a  great  demand  for  buds  from  the  Tib- 
betts trees  and  before  long  this  variety,  now  known  as  the 
Washington  navel  from  the  fact  that  the  first  trees  came 
to  California  from  Washington,  was  rapidly  supplanting 
all  other  varieties.  The  two  original  trees  are  still  living 
and  bearing,  one  having  been  transplanted  to  the  grounds  of 
the  Glenwood  Mission  Inn  at  Riverside  by  President  Roose- 
velt in  1903,  and  the  other  to  the  head  of  Magnolia  Avenue, 
Riverside,  which  traverses  one  of  the  most  famous  orange 
producing  districts  in  the  world.* 

What  has  been  the  development  from  these  inconspicuous 
beginnings  that  have  just  been  sketched?  An  adequate  con- 
ception of  the  amazingly  rapid  progress  of  the  industry  can 
only  be  conveyed  by  a  survey  of  citrus  culture  throughout 
the  world : 

The  citrus  fruit  crop  of  the  world  is  equal  to  90,000.000 
to  100,000,000  boxes  of  California  capacity  or  from  230,- 
000  to  250,000  carloads  of  California  size.  The  five  most 
important  countries  in  the  order  of  their  production  are: 
the  United  States,  Spain,  Italy,  Japan  and  Palestine.  The 
United  States  and  Spain  each  produce  approximately  30 
per  cent.,  or  68,000  carloads,  Italy  25  per  cent.,  or  58,000 

*  Babcock :  "Introduction  of  the  Navel  Orange  into  California," 
in  University  of  California  Journal  of  Agriculture,  December,  1914, 
pp.  130-131;  Colt:    op.  cit.,  pp.  17-23- 


IN   THE   CITRUS   INDUSTRY  19 

carloads,  Japan  and  Palestine  each  less  than  5  per  cent,  of 
the  world's  production. ° 

And  it  is  due  to  California's  activity  that  the  United 
States  can  take  this  prominent  position  among  citrus  pro- 
ducing countries.  At  present  in  California  there  are  almost 
200,000  acres  of  citrus  groves,  some  two-thirds  of  which 
are  in  bearing,  the  remainder  consisting  of  young  trees. 

It  is  impossible  to  present  accurate  statistics  either  of  the 
growth  or  of  the  present  extent  of  the  citrus  industry.  Some 
counties  report  the  number  of  trees,  others  the  number 
of  acres  planted.  Since  the  number  of  trees  to  the  acre 
varies  somewhat  widely  it  is  impossible  to  give  totals  for 
either  acreage  or  trees  except  as  rough  approximations. 
The  figures  given  in  the  reports  of  the  California  State 
Board  of  Equalization  (1890-1914)  were  found  to  be  so 
unreliable  that  statistics  for  the  earlier  period  cannot  be 
given.  However,  there  was  a  steady  and  rapid  growth  in 
the  industry,  except  for  the  few  years  of  depression  during 
the  early  '90s.  Since  1903  the  Citrus  Protective  League 
has  assembled  data  from  official  and  private  sources  and 
offers  figures  which,  though  they  are  conflicting  at  certain 
points,  should  not  convey  an  erroneous  impression  of  the 
real  situation. °     (See  table  on  page  20.) 

The  relative  importance  of  oranges  and  lemons  is  con- 
cisely stated  by  Wallschlaeger : 

Of  the  total  acreage  83  per  cent,  consisted  of  oranges 
and  17  per  cent,  of  lemons,  64  per  cent,  was  of  bearing  age 
and  36  per  cent,  was  of  non-bearing  age.  Of  the  bearing 
acreage  85  per  cent,  consisted  of  oranges  and  15  per  cent. 

'•  Wallschlaeger :  "The  World's  Production  and  Commerce  in  Citrus 
Fruits  and  Their  By-Products,"  Citrus  Protective  League  of  California, 
Bulletin  No.  it,  Introduction. 

«  Citrus  Protective  League :  Bulletin  No.  il,  pp.  67-68 ;  cf.,  Citrus 
Protective  League,  Bulletin  No.  p,  pp.  7-8. 


20  COOPERATIVE    MARKETING 

of  lemons,  and  of  the  non-bearing  acreage  79  per  cent,  con- 
sisted of  oranges  and  21  per  cent,  of  lemons.' 

Number  of  Acres  of  Orange  and  Lemon  Trees  in  Cali- 


fornia, 

1903-1915 

Oranges 

Lemons 

Total 

1903 

65,764 

17,893 

83,657 

1904 

70,432 

14,565 

84,997 

1905 

74,741 

13,629 

88,370 

1906 

89,862 

15,568 

105,430 

1907 

100,358 

16,064 

116,422 

1908 

128,709 

19,422 

148,131 

1909 

138,693 

21,934 

160,627 

I9IO 

144,043 

24,139 

168,182 

I9II 

160,718 

33,612 

194,330 

I9I2 

156,882 

32,441 

189,323 

I9I3 

158,801 

32,556 

191,357 

I9I4 

171,932 

.  36,374 

208,306 

1915 

168,453 

36,670 

205,123 

This  shows  clearly  that  of  recent  years  the  proportion 
of  lemon  plantings  as  compared  with  that  of  oranges  has 
been  increasing.  Turning  now  to  the  location  of  this  pro- 
ducing area,  we  find  that  it  is  widely  scattered.  Though 
to  many  people  orange  growing  and  southern  California 
are  synonymous,  it  is  a  fact  that  oranges  are  commercially 
produced  from  Imperial  Valley  to  Shasta,  which  lies  some 
725  miles  to  the  north,  in  the  same  latitude  as  New  York 
City.  In  other  words,  throughout  the  extent  of  California's 
great  thermal  belt  there  are  locations  suitable  for  raising 
oranges.  However,  classified  according  to  contiguity,  there 
are  four  principal  producing  areas  and  several  minor  areas. 
By  far  the  most  important  is  that  district,  forming  a  horse- 
shoe, which  stretches  from  Santa  Ana  and  Fullerton, 
through  Whittier  and  the  Los  Angeles  region,  thence  up 
the  San  Gabriel  Valley,  and  terminates  in  the  important 
district  comprising  the  San  Bernardino,  Riverside,  Red- 
lands  and   Colton   regions.     In  this  group,   composed   of 

"^  Citrus  Protective  League :     Bulletin  No.  11,  p.  67. 


IX    THE    CITRUS   INDUSTRY  21 

Orange,  Los  Angeles,  San  Bernardino  and  Riverside 
counties,  is  situated  68  per  cent,  of  the  citrus  acreage. 
Next  in  importance  is  the  area  lying  in  the  lower  foot  hills 
of  the  eastern  side  of  the  southern  end  of  the  San  Joaquin 
Valley.  Centring  at  Porterville  and  Lindsay  in  Tulare 
county  and  extending  south  into  Kern  and  north  into 
Fresno  county  is  a  district  including  24  per  cent,  of  the 
citrus  area.  Of  minor  significance  as  compared  with  the 
two  former  areas  are  that  having  San  Diego  as  its  com- 
mercial centre  and  that  located  in  Ventura  and  Santa  Bar- 
bara counties. 

Another  classification  would  divide  the  producing  area 
into  the  coastal  and  the  inland  districts.  San  Diego, 
Orange,  Los  Angeles,  Ventura  and  Santa  Barbara  counties 
fall  within  the  coastal  division.  Here  an  unusually  equable 
climate  obtains,  witii  warm  winters  and  cool  summers.  The 
prevailing  winds  are  from  the  Pacific,  hence  the  air  is  far 
more  moist  than  is  the  case  in  the  interior  valleys.  Dif- 
ferences in  temperature  between  day  and  night,  while 
marked  throughout  California,  are  relatively  less  than 
farther  inland.  This  division  produces  the  bulk  of  the 
lemons  and  Valencia  Late  oranges.  While  for  the  industry 
as  a  whole  lemons  represent  only  about  15  per  cent.,  in 
some  of  the  coastal  counties,  such  as  San  Diego,  Ventura 
and  Santa  Barbara,  there  are  twice  as  many  acres  in  lemons 
as  in  oranges,  and  even  in  Los  Angeles  county  lemons  con- 
stitute 23  per  cent,  of  the  total  citrus  acreage. 

Marked  differences  occur  in  the  interior  valleys,  where 
lie  Riverside,  San  Bernardino  and  Tulare  counties.  Sum- 
mers are  hotter  and  winters  colder  than  along  the  coast. 
Dry  air  and  abundant  sunshine  are  the  rule.  These  condi- 
tions seem  to  be  ideally  suited  to  the  needs  of  the  Wash- 
ington navel  orange.  The  fruit  is  highly  colored,  of  fine 
texture,  and  ripens  from  four  to  six  weeks  earlier  than 


2.2  COOPERATIVE    MARKETING 

fruit  grown  under  the  influence  of  the  ocean  breezes.  In 
contrast  with  some  of  the  important  lemon  counties  men- 
tioned above,  98  per  cent,  of  the  citrus  area  of  Tulare 
county  must  be  credited  to  oranges,  and  most  of  these  are 
navels. 

The  principal  citrus  counties  in  order  of  importance,  to- 
gether with  the  acreage  in  1913,  are:* 

County  Acres  Oranges    Acres  Lemons    Total  Acres 

Los  Angeles   37,075  13,379  48,454 

San  Bernardino   38,596  4,198  42,794 

Tulare    40,200  950  41,150 

Riverside    19,657  4,674  24,331 

Orange    I2,393  3,165  15,558 

Ventura    2,740  4,580  7,320 

San  Diego    680  1,672  2,352 

By  consideration  of  these  figures  it  appears  that  the  im- 
pression that  oranges  and  lemons  can  be  grown  promis- 
cuously in  almost  any  section  of  southern  California  is 
incorrect.  The  essential  conditions  are  many  and  rigid : 
the  soil  must  be  suitable,  the  area  must  not  be  subject  to 
frost  or  heavy  winds,  proper  drainage  must  be  secured, 
adequate  and  permanent  sources  of  water  supply  must  be 
developed.  The  result  is  that  within  the  vast  area  of  south- 
ern California,  almost  as  large  as  the  state  of  Illinois,  only 
140,000  acres  is  devoted  to  citrus  fruit  culture.  As  has 
been  intimated  this  producing  area  is  widely  scattered,  and 
for  the  most  part  is  confined  to  the  protected  valleys  of 
the  foothill  regions,  though  some  important  plantations  are 
found  elsewhere. 

Citrus  growing  in  Florida  has  expanded  tremendously 
in  recent  years,  the  greatest  growth  appearing  in  the  pro- 
duction of  pomelos.  Since  the  Census  gives  figures  for  the 
number  of  citrus  trees  in  both  California  and  Florida  it  is 

*  Citrus  Protective  League :    Bulletin  No.  11,  p.  67. 


IN   THE   CITRUS   INDUSTRY  23 

possible  to  compare  the  importance  of  these  two  sections  to 
the  industry  as  a  whole.     For  1910  the  figures  are:® 

California  Florida 

Citrus   Trees    10,102,868  5,244,552 

Boxes    (1909)    17,318,497  5,974,135 

Value    (1909)    $16,075,444  $5-495,863 

Other  States  take  such  an  inconspicuous  part  in  citrus 
growing  that  they  may  be  ignored  for  practical  purposes. 
However,  Arizona,  Louisiana  and  Texas  are  rapidly  ex- 
tending production,  and  may  sometime  develop  into  real 
competitors  with  the  two  great  citrus  States.  Comparing 
California  and  Florida,  it  appears  that  California  supports 
twice  as  many  trees  and  produces  three  times  as  many  boxes 
of  fruit  as  Florida.  A  more  rapid  growth,  however,  is 
taking  place  in  Florida  than  in  California.  It  appears  that 
in  1910  California  was  responsible  for  somewhat  more  than 
73  per  cent,  of  our  national  production  of  citrus  fruits, 
though  this  percentage  has  probably  not  been  maintained. 

The  value  of  citrus  groves,  affected  by  the  infinite  varia- 
tions in  soil  quality,  location,  water  rights  and  condition 
of  the  orchard,  ranges  from  $500  up  to  $4,000  an  acre.  In 
southern  California,  before  the  disastrous  frost  of  1913. 
very  little  first  class  property  in  full  bearing  sold  for  less 
than  $r,8oo  to  $2,000  an  acre,  while  in  the  Tulare  region 
prices  for  desirable  groves  fluctuated  widely  around  the 
$1,200  and  $1,500  level.  Since  that  date  there  have  been 
so  few  sales  that  it  is  difficult  to  form  an  idea  of  prices, 
yet  they  are  unquestionably  lower  by  a  large  percentage 
than  the  former  level. 

According  to  data  collected  by  the  Citrus  Protective 
League  and  the  California  Fruit  Growers  Exchange,  there 
are  some  12,000  to  15,000  growers  of  citrus  fruits  in  Cali- 
fornia, employing  25,000  laborers.     Directly  or  indirectly 

•  Thirteenth  Census  :    Vol.  V,  p.  718. 


24  COOPERATIVE    MARKETING 

the  industry  affords  a  livelihood  for  about  150,000  people. 
Since  the  citrus  area  amounts  to  190,000  acres  it  follows 
that  the  average  ranch  contains  from  thirteen  to  fifteen 
acres.  There  are  a  few  groves,  often  owned  by  corpora- 
tions, that  contain  500  acres  or  more,  but  in  general  it  may 
be  said  that  a  man  owning  thirty  acres  is  regarded  as  a  large 
•'TOwer.  By  far  the  most  common  unit  is  that  of  five  or 
Ten  acres.  These  figures  seem  insignificant  to  one  familiar 
with  the  size  of  the  ordinary  farm  in  the  United  States, 
but  it  must  be  remembered  that  on  a  value  basis  even  a 
five  acre  orange  grove  at  $2,000  an  acre  compares  very 
favorably  with  the  ordinary  middle  Western  farm. 

Growing  citrus  fruits  is,  then,  distinctly  a  capitalistic 
enterprise.  While  it  is  true  that  plenty  of  orange  and  lemon 
properties  can  be  obtained  for  a  few  hundred  dollars  an 
acre,  the  chances  are  strong  that  there  is  something  funda- 
mentally wrong  with  such  property.  To  purchase  enough 
desirable  property  for  a  satisfactory  citrus  enterprise  there 
are  required  a  good  many  thousands  of  dollars,  so  it  cannot 
be  thought  of  as  an  industry  that  offers  many  attractions 
to  the  poor  man. 

These  facts  suggest  the  type  of  owner  that  we  may  rea- 
sonably expect.  Almost  always  he  is  a  man  with  the  out- 
ward marks  of  comfortable  prosperity,  and  frequently  he 
is  a  man  of  wealth.  The  industry  has  been  sufficiently  at- 
tractive and  profitable  to  induce  many  business  and  pro- 
fessional men  to  join  the  ranks  of  the  orchardists.  It  is 
asserted,  and  not  only  by  Calif ornians,  with  some  degree 
of  reasonableness  that  the  average  California  orange  grower 
is  the  most  intelligent  farmer  in  the  world.  In  fact,  the 
industry  presents  problems  so  numerous  and  so  complicated 
that  a  high  grade  of  intelligence  is  imperatively  essential 
to  success  as  an  owner,  and  even  the  orchard  laborer  needs 
to  be  a  man  of  some  education  and  considerable  judgment. 


IN    THE    CITRUS    INDUSTRY  25 

The  children  throughout  the  citrus  belt,  with  very  few  ex- 
ceptions, receive  a  high  school  education,  and  the  percentage 
of  college  students  is  large. 

Corresponding  with  the  fact  that  citrus  growing  is  con- 
ducted on  business  principles  much  more  than  most  farming 
we  find  that  the  whole  life  and  arrangements  of  the  orange 
grower  resemble  those  of  the  business  man  much  more  than 
they  do  the  accepted  picture  of  farm  life.  Ordinarily  the 
citrus  grower  produces  nothing  but  citrus  fruits.  He  must 
buy  hay  and  grain  for  his  horses,  vegetables,  fruit  and  meat 
for  his  table.  Frequently  he  has  to  buy  his  milk,  butter 
and  eggs.  The  baker's  wagon  and  laundry  wagon  are 
familiar  sights  in  the  citrus  area,  while  they  would  be 
strange  sights  indeed  in  a  large  part  of  our  agricultural 
territory.  Homes  among  the  orange  groves  average  con- 
siderably better  in  respect  to  comfort  and  convenience  than 
those  on  United  States  farms  as  a  whole.  In  fact,  it  is 
far  from  uncommon  for  a  business  man  of  the  cities  to 
own  an  orange  ranch  primarily  as  a  home  site  rather  than 
as  a  commercial  enterprise.  Many  homes  are  not  only 
comfortable  but  pretentious,  and  are  supplied  with  all  of 
the  modern  urban  conveniences.  Since  the  average  citrus 
holding  is  only  about  fifteen  acres,  "farm  loneliness,"  which 
Professor  Carver  has  pronounced  one  of  the  most  difficult 
rural  problems,  is  in  large  measure  non-existent.  More- 
over, the  magnificent  system  of  California  boulevards,  com- 
bined with  the  fact  that  a  large  percentage  of  growers  own 
automobiles,  gives  easy  access  to  the  cities  with  their  ad- 
vantages. Few  groves  are  more  than  five  miles  distant 
from  some  kind  of  town. 

Finally,  the  orchardist  is  accessible  to  the  superb  grade 
and  high  school  system  of  which  California  is  justly  proud. 
By  no  means  to  be  neglected  in  an  enumeration  of  the 
motives  which  lead  high  grade  men  to  enter  orange  grow- 


26  COOPERATIVE    MARKETING 

ing  is  the  possibility  of  a  peculiarly  clean,  independent  and 
interesting  form  of  outdoor  life  amid  comfortable,  beauti- 
ful and  healthful  natural  surroundings  among  people  whose 
watchwords  are  cooperation  and  progressiveness. 

With  this  general  description  of  the  California  orange 
or  lemon  ranch,  we  are  in  a  position  to  proceed  to  an  ex- 
amination of  the  rather  technical  processes  involved  in  the 
care  of  the  grove  and  preparation  of  the  fruit  for  market- 
ing. Such  a  survey  is  necessary,  for  it  is  this  very  intricacy 
and  specialization  which  have  caused  and  which  maintain 
the  system  of  cooperation  which  is  our  primary  interest. 
Without  difficult  problems,  localized  within  a  comparatively 
small  area,  it  is  exceedingly  doubtful  whether  the  present 
marketing  methods  could  have  been  developed.  From  the 
fact  that  citrus  growing  is  a  peculiarly  skilled  occupation 
tenancy  has  not  developed  to  any  extent  in  the  orange  area 
as  it  has  in  so  many  other  branches  of  agriculture.  Owners 
sometimes  live  away  from  their  ranches  and  exercise  con- 
trol through  managers,  but  leasing  or  the  share  system  is 
practically  unknown. 

First  and  most  important  for  most  agricultural  under- 
takings is  the  quality  of  the  soil.  In  citrus  growing,  how- 
ever, there  are  many  far  more  important  considerations. 
While  a  deep  loamy  soil  is  to  be  preferred,  orchards  are 
successfully  grown  on  soils  that  appear  to  be  almost  pure 
sand  and  on  heavy  adobe  and  clay  soils.  "Hardpan"  is  to 
be  avoided,  and  in  general  groves  on  heavy  soils  require 
the  most  careful  and  skilful  culture.  But  California  soils 
are  so  variable,  all  kinds  appearing  within  the  same  district 
or  even  within  the  same  grove,  that  no  hard  and  fast  lines 
can  be  drawn,  and  if  other  conditions  are  favorable,  the 
soil  will  usually  be  found  to  be  satisfactory. 

Among  the  most  important  cultural  processes  is  irriga- 
tion, for  upon  this  the  very  life  of  the  industry  depends. 


IN    THE    CITRUS    INDUSTRY  27 

As  no  rain  is  expected  between  May  i  and  November  i, 
it  is  necessary  to  supply  the  trees  with  moisture  by  artificial 
methods.  One  common  practice  is  to  apply  the  water  once 
a  month  during  the  dry  season,  but  the  amount  applied  and 
the  manner  in  which  the  operation  is  carried  on  vary  ac- 
cording to  the  soil,  the  slope  of  the  land  and  the  success 
of  cultural  methods  employed  for  conserving  the  moisture. 
The  most  usual  way  to  irrigate  an  orchard  is  to  make 
furrows  between  the  rows  of  trees,  and  then  turn  into  the 
furrows  a  constant  stream  of  such  a  size  that  it  will  prac- 
tically all  be  absorbed  by  the  time  it  reaches  the  lower  end 
of  the  row.  An  even  distribution  of  water  to  each  tree 
for  the  same  number  of  hours  is  the  ideal,  and  a  skilled 
irrigator  can  estimate  and  regulate  these  streams  with 
amazing  accuracy.  Each  furrow  is  numbered,  and  the  ir- 
rigator from  the  lower  end  of  the  row  inspects  the  furrows 
and  notes  on  a  card  the  condition  of  each.  Good  irrigators 
work  much  harder  with  their  heads  and  their  pencils  than 
with  their  shovels.  According  to  the  composition  of  the 
soil  the  number  of  furrows  between  two  rows  of  trees  varies 
from  one  to  eight  and  the  time  that  the  water  is  allowed 
to  run  in  each  furrow  varies  from  four  or  five  hours  to 
two  or  three  days. 

Irrigating  water  is  ordinarily  supplied  through  concrete 
pipes  with  automatic  turn-outs  or  through  flumes,  either 
concrete  or  wooden,  laid  along  the  highest  side  of  the  grove. 
Lack  of  water  for  irrigation  is  one  of  the  most  effective 
checks  to  an  extension  of  the  producing  area,  and  it  is  the 
height  of  folly  to  plant  a  grove  without  being  reasonably 
sure  that  water  can  be  developed  on  the  land  or  delivered 
to  the  land  from  more  remote  sources.  Differences  in  the 
cost  of  water  for  irrigation  purposes  are  among  the  most 
important  causes  of  differences  in  cost  of  production  in 
various  districts.    Water  may  be  obtained  from  bored  wells 


28  COOPERATIVE    MARKETING 

by  the  use  of  force  pumps,  or  from  mountain  streams,  or 
from  storage  reservoirs  built  to  impound  storm  waters  from 
the  winter  rains.  The  first  method  is  very  expensive,  the 
second  costs  almost  nothing,  the  third  may  be  advanta- 
geous or  prohibitively  expensive  according  to  local  con- 
ditions. The  problems  of  water  supply  and  irrigation  are 
among  the  most  stubborn  which  the  grower  is  called  upon 
to  face,  and  without  question  drastic  measures  must  be 
taken  for  the  conservation  of  water  if  the  citrus  industry 
is  to  retain  its  prosperity. 

Next  to  irrigation,  cultivation  occupies  the  most  im- 
portant position  in  the  care  of  a  grove.  The  purpose  of 
cultivation  is  primarily  conservation  of  moisture,  hence 
tillage  is  intensive  from  about  March  to  November.  By 
means  of  specially  designed  chisel  cultivators  or  by  disc 
harrows  the  soil  is  frequently  turned  or  loosened  so  that  a 
crust  is  never  allowed  to  form.  In  common  with  all  dry 
farming  practice,  a  dust  mulch  is  formed  to  a  depth  of 
several  inches  which  effectually  prevents  evaporation.  This 
loose  soil  also  facilitates  irrigation  by  making  it  possible 
for  the  water  to  be  more  readily  absorbed. 

During  the  fall  a  cover  crop  is  usually  drilled  between 
the  citrus  rows.  Vetch,  melilotus,  field  peas,  bur  clover  and 
barley  are  the  most  popular  cover  crops,  vetch  and  melilotus 
being  much  the  most  widely  preferred.  This  cover  crop, 
which  is  plowed  under  toward  the  end  of  the  rainy  season, 
serves  several  purposes :  it  supplies  the  soil  with  nitrogen 
(if  a  legume)  and  also  furnishes  humus,  in  which  the  semi- 
arid  and  arid  soils  of  the  West  are  especially  deficient ;  it 
helps  to  hold  the  rainfall  on  the  land,  and  prevents  gullying 
by  the  winter  rains;  it  tends  to  check  certain  fungous  dis- 
eases, like  the  brown  rot  of  the  lemon. 

Just  as  is  the  case  with  other  fruit  growing  industries, 
the  fertilization  of  citrus  groves  has  not  been  reduced  to  an 


IN    THE    CITRUS    INDUSTRY  29 

exact  science.  Each  grower  has  his  own  ideas  on  the  sub- 
ject, and  they  rarely  coincide  with  the  views  of  other 
growers.  Commercial  fertilizer  is  extensively  used ;  in  fact, 
with  the  exception  of  citrus  plantations  in  Florida  it  is 
applied  more  heavily  than  in  any  other  fruit  raising  indus- 
try. Applications  are  made  twice  a  year,  in  the  fall  and 
spring.  One  widely  followed  practice  is  to  give  each  tree 
as  many  pounds  of  fertilizer  annually  as  the  number  of 
years  during  which  the  tree  has  been  planted.  Thus  a 
twelve  year  old  tree  would  receive  twelve  pounds  of  fer- 
tilizer. But  the  condition  of  the  trees  and  the  character 
of  the  soil  in  different  groves  are  so  varied  that  no  general 
rule  of  fertilization  can  be  stated.  The  three  essentials  of 
suitable  fertilizer  for  citrus  trees  are  nitrogen,  phosphoric 
acid  and  potash,  but  the  proper  quantities  of  each  of  these 
elements  to  apply  in  order  to  secure  maximum  results  can 
be  determined  only  by  prolonged  and  careful  experimenta- 
tion on  each  grove.  Where  available,  large  quantities  of 
barnyard  manure  are  also  used,  partly  for  the  sake  of  the 
chemical  elements  mentioned  above,  partly  to  add  humus 
to  the  soil.  It  is  applied  more  or  less  throughout  the  entire 
course  of  the  year. 

Citrus  growers  probably  have  more  enemies  to  overcome 
than  any  other  type  of  farmer.  They  must  wage  incessant 
warfare  against  insects  and  fungous  pests,  guard  against 
various  kinds  of  mechanical  injury  to  the  trees  and  fruit, 
and  strive  to  minimize  troubles  attributable  directly  to  nat- 
ural phenomena,  such  as  sunburn,  frost,  premature  drop- 
ping, dropping  caused  by  wind,  splitting,  puffing,  or,  with 
Valencias,  turning  green  after  once  having  become  yellow. 
All  of  these  vexations  are  receiving  constant  study  by  in- 
dividual growers,  by  the  United  States  Department  of  Agri- 
culture and  by  the  Citrus  Experiment  Station  of  the  State 
University.     Some  of  the  problems  are  well  in  hand,  others 


30 


COOPERATIVE    MARKETING 


have  not  yet  been  solved,  but  all  of  these  categories  of 
difficulties  each  year  cause  losses  to  the  growers  that  mount 
up  into  large  figures. 

Perhaps  a  true  conception  of  the  growers'  difficulties  can 
most  vividly  be  presented  by  enumerating  one  only  of  the 
foregoing  categories  of  troubles,  namely,  the  insect  pests. 
According  to  Professor  Essig,  the  orange  is  host  to  the 
following  insects,  truly  a  formidable  array  :^^ 


angular  winged  katydid 

aspidistra  scale 

Baker's  mealy  bug 

barnacle  scale 

bean  thrips 

black  citrus  plant  louse 

black  parlatoria 

black  scale 

blue  sharpshooter 

branch  and  twig  borer 

bur  clover  or  cowpea  aphis 

California  katydid 

California  parsley  caterpillar 

chaflf  scale 

citrus  mealy  bug 

citrus  red  spider 

citrus  white  fly 

common  termite 

cottony  cushion  or  fluted  scale 

cottony  maple  or  vine  scale 

destructive  eledoes 

euonymus  scale 

Florida  red  scale 

Florida  wax  scale 

frosted  scale 

Fuller's  rose  beetle 

Glover's  scale 

Gray's  citrus  scale 

green  citrus  plant  louse 

green  peach  aphis 

greenhouse  orthezia 


greenhouse  thrips 

Harlequin  cabbage  bug 

hemispherical  scale 

ivy  or  oleander  scale 

Japanese  or  Mexican  wax  scale 

large  vagrant  grasshopper 

lesser  shot  hole  borer 

long  tailed  mealy  bug 

melon  aphis 

Mexican  katydid 

minute  false  chinch  bug 

omnivorous  looper 

orange  chionaspis 

orange  peel  miner 

orange  tortrix 

pernicious  or  San  Jose  scale 

purple  scale 

Putnam's  scale 

red  scale 

rust  mite 

soft  brown  scale 

spotted  root  fly 

tobacco  flea-beetle 

two  spotted  mite 

variegated  cup  worm 

Western  twelve  spotted  cucumber 

beetle 
Western  twig  borer 
wheat  thrips 
yellow  scale 


^0  Essig:   "Injurious  and  Beneficial  Insects  of  California,"  pp.  Ivi-lvii. 


IN    THE    CITRUS    INDUSTRY  31 

Scale  insects  of  assorted  varieties  probably  give  the  most 
trouble,  and  the  principal  mode  of  procedure  against  them 
is  fumigation  with  hydrocyanic  acid  gas.  This  fumigation 
is  required  once  a  year  or  once  in  two  years,  and  is  done 
in  the  fall  and  early  winter.  Fumigation  is  carried  on  at 
night  to  keep  from  scorching  the  foliage,  and  the  method 
is  as  follows :  A  heavy  canvas  is  thrown  completely  over 
and  around  the  tree,  and  is  allowed  to  extend  to  the  ground 
on  all  sides.  A  receptacle  containing  a  mixture  of  sulphuric 
acid,  sodium  or  potassium  cyanide  and  water,  varying  in 
amount  according  to  the  size  of  the  tree,  is  then  inserted 
underneath  the  canvas,  thus  exposing  the  insects  to  the 
poisonous  fumes  for  half  an  hour  or  longer.  At  the  end 
of  this  time  the  "tents"  are  removed  to  other  trees.  An- 
other method  of  proceeding  against  scale  insects  is  by  a 
distillate  spray,  but  this  is  not  practiced  as  commonly  as  it 
was  in  former  years.  Red  spiders  are  controlled  by  sulphur- 
ing the  trees. 

Pruning  is  an  important  aspect  of  orange  and  lemon 
culture,  but  one  about  which  it  is  difficult  to  lay  down  gen- 
eral statements.  Common  practice  varies  from  no  pruning 
at  all  to  almost  constant  pruning.  In  general,  orange  trees 
are  pruned  much  less  than  lemons.  With  oranges  the  main 
ideas  are  to  keep  down  the  sucker  growth  and  open  the 
tree  here  and  there  to  the  air  so  that  new  fruiting  brush 
will  be  stimulated.  On  the  other  hand  the  lemon  is  such 
a  vigorous  grower  that  drastic  cutting  is  necessary  to  re- 
move sucker  growth  and  also  to  keep  the  tree  from  be- 
coming so  large  that  it  cannot  be  economically  picked  or 
fumigated.  Fruit  of  the  highest  quality  is  produced  on 
the  interior  branches  so  pruners  keep  this  point  in  mind 
in  the  case  of  b:  th  oranges  and  lemons.  Citrus  trees  some- 
times have  a  tendency  to  bear  heavier  loads  than  their 
branches  will  support,  so  pruners  aim  at  making  the  frame- 
work of  the  tree  stocky  and  sturdy. 


32  COOPERATIVE    MARKETING 

A  very  important  problem,  but  one  which  has  not  yet  been 
satisfactorily  solved,  is  the  prevention  of  loss  by  frost.  A 
citrus  grove  can  stand  very  little  cold,  and  any  temperature 
lower  than  27  or  28  degrees,  Fahrenheit,  continuing  for 
some  time,  ruins  the  fruit.  If  the  thermometer  falls  to  24 
degrees  or  lower  for  any  length  of  time  the  trees  are  more 
or  less  seriously  damaged.  The  importance  of  frost  pro- 
tection was  forcefully  brought  home  to  the  growers  during 
the  season  of  1912-13  by  a  frost  which  destroyed  millions 
of  dollars  worth  of  fruit  and  caused  injury  to  the  orchards 
which  it  is  difficult  to  estimate.  However,  this  frost  was 
the  first  ruinous  one  that  occurred  in  the  history  of  the 
California  citrus  industry. 

Many  methods  of  artificially  raising  the  temperature  in 
groves  are  in  vogue.  Irrigation  water  is  sometimes  run 
in  the  furrows  in  order  to  take  advantage  of  the  latent 
heat  stored  in  the  water.  More  common  are  various  firing 
devices.  Wet  straw  is  at  times  burned  at  different  places 
in  the  grove  so  that  the  smoke  may  form  a  cloud  and  shield 
frozen  fruit  from  the  direct  rays  of  the  morning  sun,  and 
thus  prolong  the  thawing  process,  for  much  more  damage 
is  done  by  rapid  thawing  than  by  freezing.  Most  common 
is  the  liberation  of  artificial  heat  to  keep  the  fruit  from 
freezing.  Baskets  of  coal  or  briquets  have  been  used  for 
this  purpose,  but  now  the  almost  universal  fuel  is  petroleum 
in  some  form,  crude  oil  or  slop  distillate.  This  is  fired  in 
some  kind  of  oil  heater,  of  which  there  are  numerous  makes. 
Some  groves  even  have  an  elaborate  oil  reservoir  system 
with  oil  pipes  down  every  row  and  heaters  controlled  from 
a  central  point.  A  good  heating  system  can  raise  the  tem- 
perature six  to  ten  degrees.  This  is  practically  always 
enough  to  prevent  frost  injury,  but  for  reasons  which  will 
be  stated  later  the  present  widespread  use  of  devices  for 
frost  protection  is  likely  to  decline. 


IN    THE    CITRUS    INDUSTRY  33 

It  is  difficult  to  impress  those  who  are  not  famiHar  with 
the  intricacies  of  orange  and  lemon  growing  with  the  im- 
portance of  individual  skill  on  the  part  of  the  owner  or 
manager.  There  is  such  a  multitude  of  factors  entering  into 
successful  growing  that  a  practical  scientific  and  business 
education  is  almost  a  necessity  in  addition  to  the  ordinary 
intelligence  that  the  common  farmer  must  have.  It  has 
been  stated  that  conditions  often  vary  widely  in  the  same 
grove,  even  though  it  be  but  five  or  ten  acres  in  extent. 
Hence  it  follows  that  no  general  rules  for  cultural  procedure 
can  be  laid  down,  and  it  is  incumbent  upon  the  owner  or 
manager  to  apply  different  processes  to  different  conditions. 
To  such  a  degree  is  this  true  that  some  of  the  most  pro- 
gressive growers  take  the  individual  tree  and  not  the  grove 
as  a  whole  as  a  unit,  and  adjust  care  to  the  requirements 
of  the  individual  tree.  A  performance  card  is  made  for 
each  tree  on  which  is  entered  for  each  year  the  amount  and 
quality  of  its  fruit,  how  the  tree  responds  to  fertilization, 
what  diseases  it  has,  etc.  Then  if  any  tree  is  not  measuring 
up  to  requirements  it  can  be  budded  over  from  stocks  that 
have  proved  their  productiveness.  As  there  are  only  from 
seventy-five  to  ninety  trees  to  the  acre,  each  one  is  far  too 
valuable  to  be  neglected.  In  the  summer  the  grower  must 
be  on  the  alert  to  see  that  each  tree  has  sufficient  moisture ; 
in  the  winter  he  must  keep  a  watchful  eye  on  the  thermome- 
ter, and  at  all  times  he  must  be  sure  that  the  fertility  of  the 
soil  is  not  being  depleted,  that  insect  pests  or  fungous  dis- 
eases are  not  spreading,  and  that  the  pruning  is  being  prop- 
erly done.  Each  of  these  operations  is  so  delicate  and 
exacting  that  poor  judgment  or  neglect  at  a  critical  time 
may  mean  the  difference  between  profit  and  loss.  It  is  al- 
most an  impossibility  for  an  uneducated  man  to  become  a 
first  class  grower. 

Let  us  now  assume  that  the  crop  has  been  grown  accord- 


34  COOPERATIVE    MARKETING 

ing  to  the  foregoing  principles,  and  is  ready  for  picking. 
The  season  for  Washington  navels  begins  in  the  San 
Joaquin  Valley  about  the  middle  of  November,  and  in 
southern  California  it  begins  some  four  or  five  weeks  later. 
From  that  time  oranges  are  picked  from  the  same  tree  until 
about  the  beginning  of  June.  The  season  for  Valencia  Late 
oranges  opens  in  May,  and  picking  continues  through  Octo- 
ber. Consequently  oranges  are  being  harvested  during 
practically  all  of  the  year.  In  southern  California  Feb- 
ruary, March,  April  and  May  constitute  the  rush  season 
for  oranges,  but  in  the  Tulare  region  more  than  nine-tenths 
of  the  crop  has  as  a  rule  been  shipped  before  January. 

Times  of  shipment  in  a  typical  year  are  shown  statis- 
tically as  follows:" 

Shipments  of  Oranges  and  Lemons  from   California, 
BY  Months,   191  i 

Southern  California  Central  California 

Oranges    Lemons  Oranges  Lemons 

January    lo.o              5.5  .3  lo.o 

February   13.8              6.0  .1  lo.o 

March  17.8             8.6  1.9  4.2 

April    16.3            12.3  1.3  .0 

May   16.3            149  3-5  -8 

June  9-5            17-4  -6  .0 

July    5-2           10.5  .0  .0 

August  3.0             5.2  .0  -        .0 

September    2.0              4.2  .0  .0 

October    1.7             45  i  18.3 

November 3             6.7  40.0  44.2 

December    4.1             4.2  52.2  12.5 

loo.o  loo.o  loo.o  100. o 

Note :  Percentages  computed  on  the  total  southern 
California  and  total  central  California  shipments.  Ship- 
ments of  oranges  from  central  California  constituted  9.1 
per  cent,  of  shipments  for  the  State  as  a  whole.  Central 
California  lemons  formed  1.7  per  cent,  of  the  total  crop. 

^^  Citrus  Protective  League:     Bulletin  No.  11,  p.  71. 


IN    THE    CITRUS    INDUSTRY  35 

But  lemons  are  picked  off  the  same  tree  every  month 
in  the  year,  and  at  any  time  it  should  be  possible  to  find 
on  a  thrifty  tree  blossoms,  small  lemons  and  mature 
fruit.  With  lemons,  the  aim  is  to  secure  as  large  a  per- 
centage as  possible  of  summer  fruit  which  commands  the 
best  prices.  This  is  the  chief  reason  why  central  California 
is  not  likely  to  become  a  great  lemon  producing  area,  for, 
just  as  with  oranges,  the  lemons  there  ripen  chiefly  in  the 
winter  months.  On  the  other  hand,  June  sees  the  heaviest 
shipments   from  southern  California. 

In  the  case  of  oranges,  ordinarily  two  or  three  pickings 
are  made  from  the  same  tree,  the  two  methods  practiced 
being  "picking  to  size"  and  picking  in  zones.  The  first 
phrase  means  that  the  larger  and  more  mature  fruit  is 
picked  first,  thus  giving  the  smaller  a  better  chance  to  de- 
velop. The  second  term  describes  that  method  in  which  all 
the  fruit  in  a  specified  zone  around  each  tree  is  picked  at 
one  time.  It  is  a  common  practice  to  pick  the  fruit  that 
hangs  near  the  ground  or  at  the  extremities  of  limbs  as 
early  as  possible  in  order  to  protect  it  from  certain  fungous 
diseases  and  from  injury  by  the  wind  or  tillage  implements, 
also  to  prevent  breakage  of  limbs  as  the  fruit  increases  in 
weight.  With  lemons,  size  is  the  sole  object,  and  they  are 
picked,  whether  yellow  or  not,  if  they  will  not  pass  through 
a  ring  of  a  certain  diameter.  In  fact,  it  is  highly  desirable 
to  pick  lemons  while  green  in  color  and  allow  them  to  color 
during  the  curing  process  at  the  packing  house. 

More  and  more  the  picking  itself  is  done  by  a  gang  of 
skilled  pickers  under  the  direction  of  the  packing  house. 
In  this  work  the  Japanese  and  Mexicans  take  a  very  promi- 
nent part.  The  fruit  is  severed  from  the  branch  by  means 
of  specially  adapted  shears  or  clippers,  and  the  utmost  pre- 
caution must  be  exercised  not  to  break  the  skin  with  clipper 
or  with  finger  nail.     Neither  must  long  stems  be  left  on 


36  COOPERATIVE    MARKETING 

the  clipped  fruit,  as  these  would  puncture  other  fruit  in 
the  same  box.  As  Powell  proved  by  a  careful  study/^  any 
abrasion  of  the  skin  invites  attacks  by  different  kinds  of 
fungi,  and  probably  the  abraded  fruit  will  never  reach  the 
market.  Immense  losses  used  to  be  ascribable  to  careless 
handling,  and  now  the  constant  injunction  both  in  the  field 
and  packing  house  is  to  "handle  the  fruit  like  eggs."  As 
the  fruit  is  severed  it  is  placed  in  a  canvas  picking  sack 
which  is  slung  from  the  shoulder.  From  the  picking  sack 
it  is  transferred  to  the  picking  or  lug  boxes,  and  in  these 
it  is  conveyed  to  the  packing  house  on  well  sprung  trucks 
which  minimize  bruises  from  jarring.  Heavy  canvases 
protect  the  fruit  from  the  sun  on  the  journey  from  grove 
to  packing  house,  the  journey  in  few  cases  being  longer 
than  four  miles. 

At  the  packing  house,  which  is  alongside  a  railroad,  the 
more  detailed  work  of  preparing  the  fruit  for  shipment  is 
begun.  It  is  only  necessary  to  give  a  very  general  descripy- 
tion  of  this  stage.  After  being  received  the  fruit  is  brushed 
or  washed  according  to  its  condition,  and  is  then  graded 
by  hand  into  "fancy,"  "choice"  and  "standard"  grades. 
There  are  many  other  grading  classifications,  but  this  is 
representative.  Grading  is  based  on  form,  weight,  texture 
and  color,  but,  with  the  exception  of  the  extremely  large 
and  extremely  small  fruits,  it  is  not  based  on  size.  When 
graded,  the  fruit  is  automatically  weighed  and  sized  and 
is  then  ready  to  be  packed  unless  further  complications 
enter.  Some  oranges  and  lemons  are  treated  to  a  process 
called  "sweating"  in  order  to  bring  out  the  color.  This 
is  done  by  placing  the  fruit  in  the  "sweat  room"  and  sub- 
jecting it  to  a  constant  temperature  of  95  to  100  degrees 

12  Powell :  "The  Decay  of  Oranges  While  in  Transit  from  Cali- 
fornia," U.  S.  Department  of  Agriculture,  Bureau  of  Plant  Industry, 
Bulletin  No.  123. 


IN    THE    CITRUS    INDUSTRY  37 

for  a  few  days.  Lemons  color  naturally  in  the  process 
known  as  "curing"  if  sufficient  time  is  allowed,  but  if  it  is 
desired  to  rush  them  to  the  market  they  are  sweated.  The 
fruit  is  then  wrapped  by  hand  in  tissue  and  packed  accord- 
ing to  grade  and  size  in  the  packing  boxes  that  can  be  seen 
at  any  time  in  front  of  the  fruit  and  grocery  stores.  An 
up  to  date  packing  house  presents  an  interesting  and  compli- 
cated spectacle.  It  is  provided  with  expensive  and  elaborate 
power  machinery  and  in  efficiency  could  well  compare  with 
a  modern  factory. 

From  the  foregoing  description  it  is  evident  that  the 
citrus  industry  is  far  more  complex  than  most  other  agri- 
cultural enterprises.  It  is  therefore  to  be  expected  that  the 
cost  by  the  acre  of  producing  oranges  or  lemons  will  far 
exceed  those  for  most  other  crops.  The  Citrus  Protective 
League  has  collected  a  mass  of  data  relating  to  costs  of 
producing  both  oranges  and  lemons.  These  investigations 
followed  scientifically  constructed  schedules  and  covered  a 
wide  territory,  and  the  results  are  by  far  the  most  trust- 
worthy obtainable.  Cultural  costs  of  materials  and  labor 
for  the  production  of  oranges  and  of  lemons  were  collected 
by  the  League  in  191  o. 

In  examination  of  the  following  table,  adapted  from  the 
League's  findings  for  oranges,  it  must  be  remembered  that 
each  item  of  cost  does  not  appear  in  the  expense  account 
of  every  ranch.  For  example,  if  fumigation  appears,  spray- 
ing will  very  likely  be  absent,  etc.  Therefore,  adding  the 
column  of  average  costs  would  by  no  means  represent  the 
average  total  acre  cost  of  producing  oranges.  Since,  as 
a  rule,  only  the  best  growers  keep  accurate  and  detailed 
cost  accounts,  and  since  the  best  growers  are  usually  those 
who  have  adopted  the  most  intensive  systems  of  culture, 
it  is  probable  that  the  following  figures  on  cost  represent 
a  somewhat  higher  level  than  would  be  true  for  the  industry 


38  COOPERATIVE    MARKETING 

as  a  whole.  The  figures  do  not  include  depreciation  on  the 
groves,  buildings,  stock,  machinery,  tools,  irrigation  plant 
or  Other  equipment,  nor  do  they  include  interest  on  the  in- 
vestment, an  important  point  owing  to  the  high  prices  of 
citrus  property.  A  further  item  for  which  no  allowance 
has  been  made  is  superintendence  and  administration,  unless 
this  has  actually  been  paid  for  in  money.  The  importance 
of  skilled  management  has  been  dwelt  upon,  and  a  con- 
siderable addition  to  cost  is  legitimate  as  the  owner  is  ordi- 
narily the  manager. 

Annual  Cost  of  Producing  Oranges  in  California  in 
Dollars  an  Acre,  1910 

Cultural  cost  of  materials                   Low    Average  High 

Chemical  fertilizer    $13.10    $38.71  $58.83 

Barnyard  manure    6.25  21.74  40.77 

Water    5.72  15.30  31.45 

Fumigation   4.25  12.00  18.35 

Forage  and  grain   8.14  12.66  23.30 

Taxes   6.84  12.56  20.56 

Maintenance  and  repairs 3.57  8.97  18.60 

Insurance    30  1.07  2.50 

Frost  protection   1.67  2.22  3.62 

Incidental  1.50  2.75  4.35 

Total  materials   51-45  83.24  148.56 

Cultural  cost  of  labor 

Cultivating  9.32  20.00  33.58 

Pruning    4.04  9.50  19.08 

Irrigating   Z-3Z  7-49  19-39 

Fumigating  labor   3.71  6.50  8.44 

Spraying  2.00  6.25  12.14 

Spreading  fertilizer 71  2.12  8.00 

Other  tree  care   1.56  4.11  11.07 

Superintendence  5.00  1363  27.33 

Administration    5.24  10.75  32-73 

Total  labor    37.86  52.82  80.57 

Total  materials  and  labor 89.08  136.06  202.35 

Thus  the  total  average  cultural  cost  for  materials  is 
$83.24,  for  labor  $52.82,  and  the  entire  cultural  cost  an  acre 
$136.06.     At  the  present  time  the  item  of  frost  protection 


IN    THE    CITRUS    INDUSTRY  39 

would  unquestionably  have  to  be  increased  several  fold  to 
correspond  with  the  facts,  as  the  use  of  devices  for  frost 
protection  has  tremendously  increased  since  this  investiga- 
tion was  made. 

Lemons  cost  considerably  more  to  produce,  averaging 
$197.15  an  acre,  distributed  $108.71  to  materials  and 
$92.51  to  labor.^''  Other  costs  in  the  processes  of  putting 
citrus  fruits  before  the  consumer  are,  by  the  box : 

Oranges  Lemons 

Picking $  .077  $   253 

Hauling    028  .039 

Packing    324  -596 

Freight    828  .840 

Refrigeration   079  .026 

Selling  070  .070 


Total  $1,406  $1,824 

On  account  of  these  heavy  costs  of  producing  citrus  fruits 
and  placing  them  on  the  market  a  large  yield  is  necessary 
if  the  investment  is  to  be  profitable.  An  average  of  the 
five  year  period  1906-07  to  1910-11  shows  a  yield  of  157.6 
packed  boxes  to  the  acre  for  oranges,  and  196.2  boxes  for 
lemons.  Thus  the  cultural  cost  for  oranges  is  $.863  a  box 
and  for  lemons  practically  $1,  and  the  total  cost  of  oranges 
when  sold  to  the  first  distributor  is  $2.27  or,  estimating  150 
oranges  to  the  box,  is  $.181  a  dozen.  For  lemons  the  total 
cost  on  the  market  is  $2.82,  or,  estimating  300  lemons  to 
the  box,  is  $.10^  a  dozen.  If  these  figures  are  accurate, 
any  boxes  of  oranges  or  lemons  that  sell  for  less  than  $2.27 
or  $2.82  respectively  entail  an  actual  pecuniary  loss  on  the 
California  grower,  in  addition  to  returning  no  interest  on 
his  investment. 

^^  Citrus  Protective  League:  Bulletin  No.  9,  pp.  43-47-  There  is 
an  apparent  discrepancy  in  the  cost  of  producing  lemons,  the  sum  of 
$108.71  and  $92.51  being  $201.22.  However,  $197.15  is  the  figure  given 
by  the  League. 


40  COOPERATIVE    MARKETING 

Let  us  now  assume  that  the  fruit  is  packed,  loaded  on 
the  car,  and  ready  to  start  for  market.  The  period  between 
packing  house  and  breakfast  table  is  one  of  peculiar  in- 
terest. So,  keeping  in  mind  the  earlier  history  of  the  fruit 
and  the  kind  of  men  by  whom  it  is  grown  as  affording 
clues  about  what  to  expect  in  marketing  policy,  we  may 
now  consider  in  some  detail  the  methods  of  marketing. 


CHAPTER  III 

BEGINNINGS   OF   COOPERATIVE   MARKETING   AMONG 
CITRUS  FRUIT  GROWERS 

The  citrus  industry  of  California  is  undoubtedly  the  most 
highly  organized  of  all  agricultural  pursuits.  Not  less  than 
four-fifths  of  all  the  citrus  fruit  of  California  is  sold 
through  cooperative  as  distinguished  from  individual  effort, 
and  the  influence  of  cooperation  on  the  production  of  the 
crop  is  far  from  insignificant.  What,  then,  has  led  to  the 
development  of  these  cooperative  enterprises,  from  what 
were  they  trying  to  escape,  how  are  they  organized,  and 
what  have  they  accomplished? 

Answers  to  these  questions  must  take  us  back  to  the  early 
years  of  the  industry.  As  has  already  been  stated,  the  first 
carload  of  oranges  left  California  in  1877,  and  the  industry 
increased  so  rapidly  that  in  ten  years  the  shipments  had 
passed  the  2,000  car  mark. 

At  first,  owing  to  the  comparatively  small  output,  re- 
turns were  satisfactory,  but  with  increasing  production  the 
marketing  problem  became  ever  more  discouraging.  As 
early  as  1885  conditions  had  become  so  trying  that  a  meet- 
ing of  growers  was  held  which  resulted  in  the  formation 
of  the  Orange  Growers'  Protective  Union.  This  is  perhaps 
the  earliest  attempt  of  the  citrus  men  toward  concerted 
action,  but  as  the  organization  did  not  result  in  anything 
of  permanent  significance  it  does  not  need  to  be  described 
in  detail.  It  is,  however,  important  to  discover  why  a  need 
was  felt  for  any  organization  at  all. 

What,  therefore,  were  the  methods  of  marketing  in  vogue 

41 


42  COOPERATIVE    MARKETING 

Shipments  of  Citrus  Fruits  from  California  in  Car- 
loads, 1886-87  to  1915-161 

Oranges    Lemons  Total 

1886-7 2,200             12  2,212 

1887-8 2,500             20  2,520 

1888-9 2,782             26  2,808 

1889-90 3,476             34  3,510 

1890-1  4,016             40  4,056 

1891-2 4,400             52  4,452 

1892-3 5,871             65  5,936 

1893-4 5,726           145  5,871 

1894-5 4,687           335  5,022 

1895-6 7,010           565  7,575 

1896-7 5,972        1,378  7,350 

1897-8 13,987        1,166  15,153 

1898-9 9,448          903  10,351 

1899-1900 16,362        1,447  17,809 

1900-1  21,173        2,924  24,097 

1901-2 17,571        2,816  20,387 

1902-3 21,080        2,649  23,729 

1903-4 26,684        2,782  29,466 

1904-5 27,342        4,274  31,616 

1905-6 23,739        3,789  27.528 

1906-7 26,319        3,507  29,826 

1907-8 27,688        4,959  32.647 

1908-9 34.376        6.196  40.572 

1909-10 28,252        4,891  33  143 

1910-1  39.508        6,891  46.399 

1911-2 34.557        6,133  40680 

1912-3 16,027        2,304  18.331 

1913-4 45.306*       3.032*  48.338* 

19T4-5  39-744*      7.068*  46.812* 

i9i.'^-6 37  229*      7.244*  44,473* 

*Figures  from  Citrus  Protective  League. 

Note :    The  standard  car  of  oranges  contains  384  boxes, 

that  of  lemons,  312  boxes ;  but  orange  cars  have  varied 

from  374  to  512  boxes,  and  lemon  cars   from  310  to  376 
boxes. 

before  the  cooperative  era?  They  were  simply  those  ordi- 
narily employed  in  the  sale  of  farm  products.  Either  the 
crop  was  sold  to  buyers  or  it  was  sold  by  commission  mer- 

1  California  State  Board  of  Agriculture:    Report  for  1913,  p.  135. 


BEGINNINGS    IN    CALIFORNIA  43 

chants.  The  plan  of  selHng  a  crop  outright  to  a  buyer  who 
offers  a  lump  sum  or  a  given  price  a  pound  or  a  bushel  and 
of  shifting  to  him  the  burden  and  risk  of  superintending 
the  succeeding  stages  of  the  journey  to  the  consumer  may 
be  satisfactory  when  the  crop  is  a  staple,  whose  price  is 
quoted  from  day  to  day  and  is  therefore  a  matter  of  com- 
mon knowledge ;  or  when  it  is  a  product  which  can  be  stored 
without  deterioration,  and  which  commands  practically  the 
same  price  in  all  markets  after  the  necessary  allowance  has 
been  made  for  transportation. 

But  citrus  fruits  were  then  an  agricultural  specialty ; 
methods  of  refrigeration  were  so  ineffective  that  immediate 
consumption  was  imperative;  prices  fluctuated  enormously 
from  day  to  day  and  from  market  to  market  according  to 
weather  conditions  and  the  supply  of  fruit  available.  When 
a  car  was  billed  to  a  certain  market,  there  was  no  machinery 
for  knowing  how  many  other  shippers  had  taken  the  notion 
to  ship  to  the  same  market  at  about  the  same  time.  After 
the  car  arrived  there  was  no  means  for  withdrawing  it  if 
the  market  was  found  to  be  demoralized.  Therefore,  as 
soon  as  the  citrus  crop  had  increased  to  such  an  extent  that 
gluts  were  possible  in  the  large  markets  to  which  the  cars 
were  ordinarily  billed,  buying  oranges  on  the  trees  became 
not  merchandizing  but  speculation,  and  speculation  of  the 
most  dangerous  kind.  Owing  to  the  high  fixed  charges 
such  as  packing  and  freight,  losses  through  low  prices  in 
the  Eastern  cities  were  sometimes  heavy,  hence  a  specula- 
tive buyer  could  offer  but  little  to  the  grower  for  his  fruit. 
In  fact,  there  were  times  when  no  buyer  appeared  for  part 
of  the  fruit  at  any  price. 

But  the  worst  evils  of  speculative  buying  were  due  to 
what  the  growers  almost  unanimously  believe  to  have  been 
an  agreement  among  buyers  to  fix  maximum  prices  and  to 
apportion  the  producing  area  among  themselves  in  a  man- 


44  COOPERATIVE    MARKETING 

ner  similar  to  that  which  was  employed  by  the  famous  pipe 
pool.  So  far  as  is  known  no  written  agreements  have  come 
to  light,  but  the  facts  are  undoubted  that  for  practical  pur- 
poses the  territory  was  assigned  among  the  various  firms 
of  buyers  and  that  firms  would  refrain  from  invading  one 
another's  territory.  That  is,  a  grower  would  receive  a  bid 
for  his  crop  from  a  certain  buyer,  and  he  would  receive  no 
other  bids.  Then,  too,  the  prices  offered  were  strangely 
uniform  in  comparison  with  the  wide  fluctuations  which  the 
Eastern  market  was  constantly  exhibiting. 

Selling  on  commission  was  hardly  more  satisfactory. 
According  to  this  plan  the  grower  raised  his  fruit,  had  it 
packed,  and  then  either  sold  it  through  a  California  shipper 
or  consigned  it  to  some  commission  firm  in  the  East.  At 
that  time  selling  on  order  had  not  become  highly  developed, 
so  if  sold  through  a  California  shipper  the  fruit  was  usually 
started  rolling  toward  the  market  which  seemed  to  offer 
the  greatest  possibilities.  But  the  journey  was  a  long  one, 
delays  were  frequent,  rough  handling  and  poor  ventilation 
or  refrigeration  were  the  rule.  When  the  fruit  finally 
reached  its  destination  decay  might  have  developed  until 
the  product  was  practically  unsalable,  the  weather  might 
be  adverse,  or  the  market  might  be  over  supplied.  In  any 
of  these  contingencies  an  individual  grower  might  incur 
a  loss  which  favorable  prices  for  the  rest  of  his  crop  might 
not  more  than  recoup.  In  other  words,  by  this  method 
risks  were  undistributed. 

If  his  fruit  was  consigned  to  a  commission  merchant  in 
the  East,  the  grower  was  subject  in  a  peculiar  degree  to 
all  the  possibilities  of  exploitation  involved  in  that  system. 
The  owner  and  agent  were  at  the  opposite  sides  of  the 
continent,  and  the  likelihood  of  detection  in  betrayal  of  trust 
was  small.  Decay  was  frequently  heavy,  so  a  growler  was 
not  likely  to  become  suspicious  over  a  report  that  the  ship- 


BEGINNINGS    IN    CALIFORNIA  45 

ment  was  in  poor  condition  at  arrival  and  consequently  at 
receiving  a  low  price,  even  though  the  shipment  might  be 
in  fact  perfectly  sound.  Besides,  with  the  wide  changes 
in  price  from  day  to  day  it  was  comparatively  easy  to 
manipulate  the  ostensible  date  of  sale  forward  or  back- 
ward by  a  day  or  two  in  order  to  indicate  a  poor  price  to 
the  owner,  even  if  the  consignment  had  actually  been  sold 
on  a  strong  market.  In  short,  the  grower  was  absolutely 
dependent  on  the  integrity  of  his  agent. 

Another  cause  of  confusion  was  the  transportation  situa- 
tion. If  citrus  fruits  are  to  reach  the  market  in  the  best 
condition  ordinary  freight  service  is  out  of  the  question. 
Their  susceptibility  to  heat  and  cold  necessitates  special  pre- 
cautions throughout  the  year.  About  half  of  the  orange 
crop  goes  forward  under  ventilation  and  half  under  re- 
frigeration, and  it  is  highly  important  in  either  case  that 
the  cars  receive  constant  attention  en  route :  for  ventilation, 
to  see  that  the  vents  are  in  the  proper  position;  for  re- 
frigeration, to  see  that  the  ice  bunkers  are  kept  reasonably 
full  and  that  the  drains  are  in  order.  As  the  boxes  are 
loaded  in  the  cars  with  air  spaces  between  the  several  rows, 
rough  handling  may  result  in  a  shifted  load  which,  unless 
it  is  remedied,  may  cause  havoc  before  the  car  reaches  its 
destination.  Though  mechanically  sound  oranges  and 
lemons  are  far  from  highly  perishable  products,  decay  de- 
velops rapidly  in  any  abrasion  of  the  skin  and  will  spread 
to  uninjured  fruit.  Since  there  is  sure  to  be  some  damaged 
fruit  in  every  shipment,  an  expedited  railway  service  is  re- 
quired if  the  percentage  of  decay  is  to  be  kept  low.  Cars 
must  not  be  shunted  to  a  side  track  and  await  the  railway's 
convenience  for  moving  them.  Under  the  old  plan  of  in- 
dividual shipments  the  shipper  was  compelled  to  take  the 
railroad's  word  for  the  kind  of  attention  the  car  received 
en  route  and  for  the  condition  of  the  fruit  on  arrival.   What 


46  COOPERATIVE    MARKETING 

could  a  grower  do  when  the  railroad  reported  that  his  car 
arrived  in  good  condition,  and  the  commission  merchant 
reported  for  the  same  car  that  the  fruit  could  hardly  be  sold 
at  any  price  because  of  its  poor  condition? 

These  were  some  of  the  difficulties  which  beset  the 
growers  when  they  organized  the  Orange  Growers'  Pro- 
tective Union.  The  purpose  of  the  union  was  primarily 
to  secure  a  better  control  of  the  market  and  to  escape  from 
the  exploitation  of  buyers  and  commission  men.  It  was 
felt  to  be  unfair  that  some  growers  should  receive  from 
I  GO  per  cent,  to  200  per  cent,  more  than  others  for  the  same 
quality  of  fruit  when  all  had  exercised  the  same  degree  of 
diligence  in  producing  and  marketing  it.  However,  the 
union  was  not  firmly  organized,  as  the  principles  requisite 
to  a  stable  enterprise  were  not  clearly  grasped  by  its  origi-. 
nators,  even  though  these  men  must  receive  credit  for  at- 
tempting to  remedy  an  evil  situation. 

Concerted  activity  on  the  part  of  the  growers  was  the 
last  thing  desired  by  the  speculative  shippers,  and  their 
activities  against  the  union  were  persistent,  for  they  saw 
in  any  organization  a  sure  decline  in  their  profits  and  possi- 
bly the  ruin  of  their  business.  Their  attacks  were  success- 
ful. The  union  speedily  succumbed,  and  then  followed  the 
famous  "red  ink"  years  when  it  was  an  open  question 
whether  the  business  of  producing  citrus  fruits  in  California 
was  going  to  survive  or  not.  Speculative  buying  held  high 
carnival,  and  many  a  man  was  compelled  to  accept  for  his 
crop  a  fraction  of  what  it  had  cost  him  to  produce  it. 
Growers  who  preferred  to  gamble  on  the  state  of  the  mar- 
ket by  selling  on  commission  fared  little  better.  The  culmi- 
nation of  the  years  of  disaster  was  reached  in  1892-93, 
when  "red  ink"  accounts  in  startling  numbers  were  re- 
corded. "Red  ink"  was  the  euphemistic  way  of  saying  that 
a  grower  had  not  only  produced  and  given  away  his  crop 


BEGINNINGS    IN    CALIFORNIA  47 

for  nothing  but  that  he  also  received  a  bill  at  the  end  of 
the  year  as  a  reward  for  his  pains.  It  meant  that  the  price 
would  not  cover  the  costs  of  packing  and  transportation, 
let  alone  yielding  anything  toward  the  expenses  of  produc- 
tion. It  frequently  happened  that  the  larger  the  crop  a 
g-rower  produced  the  more  he  was  indebted  to  the  packer 
or  shipper  at  the  end  of  the  season. 

Obviously  these  conditions  were  unendurable,  but  as  so 
frequently  happens,  it  seemed  that  all  the  bad  plans  had 
to  undergo  a  thorough  trial  before  agreement  could  be 
reached  on  a  workable  basis.  Various  abortive  attempts 
were  made  at  reconciling  the  interests  of  growers  and  ship- 
pers. Together  they  tried  to  regulate  shipments  and  con- 
trol prices,  but  to  no  avail.  The  usual  outcome  was  that 
the  growers  would  find  themselves  fixed  more  firmly  than 
ever  in  the  power  of  the  speculators.  Mr.  P.  J.  Dreher, 
at  present  Vice-President  of  the  California  Fruit  Growers 
Exchange,  writes  of  this  period :  "All  attempts  so  far 
as  I  know  worked  through  the  commission  men  and  fruit 
shippers  excepting  the  Pachappa  Orange  Growers'  Associa- 
tion at  Riverside,  and  the  Claremont  Fruit  Growers'  Asso- 
ciation at  Claremont,  both  of  which  were  operating  during 
the  season  of  1892-93,  the  former  under  the  management 
of  T.  H.  B.  Chamblin,  while  I  had  the  honor  of  being 
the  president  of  the  latter.  Both  of  these  were  strictly 
cooperative  organizations  of  growers."^  In  fact,  Mr. 
Chamblin  first  began  to  put  into  practice  his  ideas  of  co- 
operation about  1888.  The  Pachappa  Association  properly 
marks  the  true  beginning  of  cooperative  organization  in  the 
California  citrus  industry,  and  Mr.  Chamblin  is  fittingly 
known  as  the  "Father  of  the  Exchange." 

As  the  average  citrus  holding  is  small  while  the  equip- 
ment necessary  for  packing  is  elaborate  and  costly,  it  was 

2  Letter  to  the  writer :   dated  November  19,  1915. 


48  COOPERATIVE    MARKETING 

out  of  the  question  for  an  ordinary  grower  to  escape  from 
the  old  Hne  packer  and  shipper  by  doing  the  work  for  him- 
self in  his  own  plant.  This  suggested  to  Mr.  Chamblin 
the  possibility  of  a  group  of  growers  federating  themselves 
together  in  the  ownership  of  a  common  packing  house. 
Then  it  was  not  a  far  step  to  the  idea  of  selling  the  fruit 
of  these  joint  owners  through  the  officers  of  the  association 
instead  of  each  grower  being  compelled  to  make  his  own 
arrangements  for  marketing.  Here  in  essence  is  the  ex- 
change idea,  the  employment  of  collective  packing  and  col- 
lective marketing  facilities. 

During  the  lean  years  of  the  early  '90s  members  of  the 
Pachappa  Association  had  fared  much  better  than  had  in- 
dividual shippers,  and  this  fact  led  to  a  meeting  of  growers 
in  Los  Angeles  in  1893.  The  purpose  of  the  convention 
was  stated  to  be :  "To  provide  for  the  marketing  of  all 
the  citrus  fruit  at  the  lowest  possible  cost  under  uniform 
methods,  and  in  a  manner  to  secure  to  each  grower  a  cer- 
tain marketing  of  his  fruit  and  the  full  average  price  to 
be  obtained  in  the  market  for  the  entire  season."  Mr. 
Chamblin  was  the  directing  spirit  of  this  meeting,  and  he 
outlined  a  plan  according  to  which  associations  for  packing 
the  fruit  were  to  be  organized  in  the  various  districts.  Then 
from  each  of  these  districts  one  representative  was  to  be 
selected,  and  the  group  of  representatives  was  to  form  a 
central  committee  which  was  to  attend  to  the  marketing 
arrangements  for  all  of  the  associations.  This  plan,  essen- 
tially sound  in  principle,  was  finally  adopted  and  put  into 
operation  during  the  years  1893-94  and  1894-95.  But  the 
details  were  not  thoroughly  worked  out,  and  a  complete 
reorganization  was  effected  in  October,  1895,  when  the 
Southern  California  Fruit  Exchange  was  organized  en- 
tirely along  cooperative  lines. 

Before  turning  to  an  examination  of  this  perfected  or- 


BEGINNINGS    IN    CALIFORNIA  49 

ganization,  we  must  consider  some  of  the  reasons  why  the 
sporadic  efforts  of  the  citrus  growers  to  work  out  their  own 
salvation  were  finally  successful  when  most  other  agricul- 
tural industries,  even  though  much  older,  still  rely  on  the 
local  buyer  or  the  commission  man  for  the  disposal  of  their 
crops.  Were  there  any  peculiar  factors  in  the  citrus  grow- 
ers' situation  which  impelled  them  to  organize  and  which 
could  furnish  the  basis  for  an  enduring  and  effective  scheme 
of  organization? 

The  key  to  the  whole  explanation  of  both  the  cause  and 
the  effectiveness  of  cooperation  in  the  citrus  industry  is 
found  in  the  fact  that  oranges  and  lemons  were  formerly 
and  are  even  yet  to  a  large  extent  an  agricultural  specialty. 
Professor  Carver  well  says  that  success  in  growing  a  staple 
product  or  one  which  will  always  sell  at  some  quotable 
price  is  primarily  attained  by  lowering  the  cost  of  produc- 
tion, by  producing  a  unit  at  a  cost  lower  than  the  general 
average.  But  with  an  agricultural  specialty  success  depends 
not  primarily  on  being  a  good  producer  but  on  being  a 
good  seller.^  A  consumer  is  rarely  induced  to  buy  more 
flour  or  more  soap  by  skillful  advertising  or  attractive  dis- 
plays ;  he  merely  is  induced  to  buy  one  kind  rather  than  an- 
other. With  a  specialty  there  is  no  universal  year  in  and 
year  out  demand.  Consumers  must  be  persuaded  to  take 
it  at  a  remunerative  price.  If  the  price  of  a  staple  falls 
a  few  points  there  are  buyers  for  practically  unlimited 
amounts,  but  the  demand  for  a  specialty  is  not  nearly  so 
responsive.  New  increments  added  to  an  already  supplied 
market  often  mean  a  more  than  proportional  decline  in 
price,  and  continued  supplies  may  soon  result  in  no  price 
being  offered  at  all.  It  is  cold  comfort  to  the  producer  of 
a  specialty  to  know  that  because  his  methods  of  production 

3  Carver:     "Principles  of  Rural  Economics,"  p.  235. 


50  COOPERATIVE    MARKETING 

were  efficient  he  did  not  lose  as  much  as  some  of  his  less 
efficient  competitors  lost. 

In  the  early  days  of  the  orange  business  when  but  a  few 
carloads  were  available  for  sale,  consumers  were  sufficiently 
eager  to  take  all  the  fruit  offered  at  prices  which  were 
always  attractive  and  sometimes  highly  gratifying  to  the 
growers.  This  very  profitableness  of  the  industry  was  the 
chief  cause  of  that  rapid  expansion  which  would  inevitably 
take  away  the  opportunity  for  scarcity  profits.  As  soon 
as  citrus  growing  began  to  be  looked  upon  as  an  industry 
instead  of  a  bonanza  scheme,  thoughtful  orchardists  began 
to  wonder  where  buyers  were  going  to  be  found  who  would 
be  willing  to  pay  enough  for  the  fruit  to  cover  expenses 
and  leave  a  profit.  For  it  cannot  be  overemphasized  that 
the  fixed  charges  in  putting  citrus  fruits  on  the  market  are 
higher  than  in  almost  any  other  agricultural  industry,  and 
the  chances  for  loss  correspondingly  greater. 

It  would  be  gratuitous  to  assume  that  a  California  orange 
rancher  is  a  philosophical  type  of  individual  who  reasoned 
out  on  abstract  grounds  the  benefits  inherent  in  coopera- 
tion. Necessity  drove  him  to  it.  If  buyers  and  commission 
men  had  shown  themselves  able  and  willing  to  dispose  of 
the  crop  in  a  reasonably  satisfactory  manner  the  old  system 
would  probably  have  flourished  to  this  day,  even  if  it  could 
be  shown  that  certain  economies  might  be  effected  through 
cooperation.  So  far  as  buyers  and  commission  men  by 
chicanery  and  attempted  exploitation  cut  their  own  throats 
through  forcing  the  growers  to  organize  they  deserve  scant 
sympathy.  However,  they  have  incurred  more  obloquy  and 
invective  than  the  facts  warrant.  There  were  certain  diffi- 
culties inherent  in  the  marketing  of  citrus  fruits  against 
which  the  buyers  and  packers  were  almost  as  helpless  as 
the  growers.  No  individual  or  firm  could  possibly  afford 
to  develop  an  information  service  that  would  give  reports 


BEGINNINGS    IN    CALIFORNIA  51 

of  the  condition  of  each  market  every  day,  tell  how  much 
fruit  had  been  sold  and  at  what  prices,  how  many  cars  were 
on  track,  how  many  were  rolling  toward  each  market,  and 
the  time  they  would  arrive.  All  of  this  information  was 
necessary  if  the  crop  was  to  be  scientifically  distributed 
geographically  or  in  relation  to  time.  Without  such  in- 
formation all  a  shipper  could  do  was  to  send  his  cars  to 
a  few  of  the  largest  markets,  where  an  additional  car  would 
cause  the  least  fall  in  price,  and  trust  to  fate  that  these 
markets  would  not  be  overcrowded  when  his  shipments  ar- 
rived. There  are  a  large  number  of  cities  in  the  United 
States  and  Canada  which  can  absorb,  say,  a  carload  of 
oranges  a  week,  provided  the  consumption  capacity  of  the 
place  for  oranges  is  properly  worked  up  by  advertising, 
including  the  actual  display  of  the  fruit.  No  one  buyer  in 
such  a  town  would  be  able  to  handle  a  whole  car  at  one 
time,  and  it  would  obviously  be  bad  business  for  a  shipper 
to  keep  an  agent  in  a  town  in  order  to  sell  one  car  a  week. 
Nor  could  a  shipper  in  California  risk  billing  a  car  to  such 
a  town  on  the  chance  that  it  would  be  profitable,  for  if  an- 
other car  happened  to  be  there  it  is  almost  certain  that 
neither  car  would  pay  the  charges  for  packing  and  freight. 

Oranges,  then,  must  be  sent  regularly  to  every  market  that 
could  use  them ;  new  markets  must  be  developed  and  the 
shipping  season  prolonged,  and  shipments  must  be  con- 
trolled so  that  gluts  and  consequent  losses  would  not  occur 
if  the  constantly  increasing  crop  was  to  be  sold  at  a  profit. 
It  should  be  reasonably  clear  that  buyers  and  commission 
men  could  not  have  met  these  conditions,  even  if  they  had 
been  far  sighted  and  honest. 

Of  less  significance  than  a  wide  and  prolonged  distribu- 
tion of  fruit,  but  by  no  means  unimportant  in  impelling  the 
growers  to  mutual  effort,  were  the  problems  connected  with 
large  scale  as  contrasted  with  small  scale  enterprise.     The 


52  COOPERATIVE    MARKETING 

fact  that  buyers  and  packers  seemed  to  be  consistently  pros- 
perous convinced  the  growers  that  there  was  money  in 
citrus  fruits  even  if  they  themselves  had  been  losing.  There 
seemed  to  be  a  good  margin  of  profit  both  in  packing  and 
in  selling  oranges,  and  the  growers  concluded  that  if  these 
profits  could  be  transferred  to  themselves  the  result  would 
be  the  same  as  if  they  had  made  their  profits  on  the  agri- 
cultural rather  than  on  the  commercial  end  of  the  business. 
It  would  also  be  apparent  to  any  thoughtful  grower  that 
since  the  fixed  charges  for  equipment  and  agents  for  pack- 
ing and  marketing,  respectively,  are  extremely  heavy,  a 
large  increase  in  the  amount  of  fruit  handled  in  one  pack- 
ing house  or  consigned  to  one  agent  would  greatly  reduce 
the  unit  costs  for  these  necessary  stages.  A  corollary  from 
this  conclusion  would  be  that,  if  buyers  and  packers  were 
making  satisfactory  profits  when  employing  inefficient 
methods,  a  scientific  system  which  had  a  few  centrally  lo- 
cated, well  equipped  packing  houses  which  could  be  run 
to  capacity  and  which  had  one  agent  to  represent  the  asso- 
ciated producers  in  each  market  rather  than  an  agent  for 
each  packer,  might  easily  contain  within  itself  the  possi- 
bility of  achieving  marked  financial  success.  The  cost  of 
collecting  the  information  prerequisite  to  intelligent  market- 
ing would  also  be  trifling  when  apportioned  among  a  large 
number  of  shippers,  but  nothing  less  than  prohibitive  if 
attempted  single  handed. 

Standardization  of  product  and  responsibility  for  it  are 
two  points  where  agriculture  in  general  has  lagged  far  be- 
hind manufacturing.  As  long  as  the  packing  of  oranges 
was  performed  by  numerous  independent  firms  or  individ- 
uals, there  was  the  greatest  diversity  in  the  manner  of  pack- 
ing and  the  care  with  which  the  labor  was  performed.  The 
chief  objection,  however,  to  the  individualistic  system  had 
its  basis  in  the  impossibility  of  establishing  definite  grades. 


BEGINNINGS    IN    CALIFORNIA  53 

Two  packing  houses  might  handle  the  same  quahty  of  fruit 
and  each  put  out  a  "fancy"  grade,  but  that  fact  would  not 
at  all  prove  that  a  fancy  orange  from  one  house  was  ap- 
proximately identical  with  a  fancy  orange  from  the  other. 
Of  all  the  fruit  delivered,  one  house  might  segregate  as 
fancy  only  5  per  cent.,  while  the  other  might  use  the  same 
term  for  25  per  cent,  of  its  output.  Similar  conditions  ob- 
tained for  the  other  grades.  So  a  prospective  buyer  of 
oranges  in  the  Eastern  market  was  not  able  to  order  by 
grade,  as  is  done  in  the  case  of  wheat  and  cotton,  unless 
he  happened  to  know  the  particular  system  of  grading  em- 
ployed in  the  packing  house  from  which  he  was  buying, 
and  it  was  obviously  impossible  for  each  one  of  the  numer- 
ous California  packing  houses  to  be  known  personally  to 
any  large  group  of  Eastern  buyers.  Therefore  buyers  were 
not  likely  to  have  as  much  confidence  in  the  orange  market 
as  they  would  have  had  if  quality  had  been  more  certain 
and  uniform;  they  would  be  particularly  diffident  about 
sending  orders  to  California  for  cars;  they  would  only 
buy  on  inspection.  Responsibility  of  many  packers  for  the 
quality  of  their  output  existed  only  in  imagination.  A  few 
packers  had  reputations  which  they  tried  to  maintain,  but 
too  often  green  oranges  or  frosted  oranges  or  mechanically 
injured  oranges  would  be  sent  forward  on  the  complacent, 
if  short  sighted,  theory  of  caveat  emptor,  and  indeed  a 
deceiv'^ed  jobber  or  consumer  had  scant  recourse.  This  pol- 
icy again  made  the  trade  timid  about  handling  oranges  and 
precluded  that  expansion  of  consumption  which  was  essen- 
tial if  the  citrus  industry  was  to  live. 

Persons  familiar  with  the  chaos  in  grading  and  packing 
methods  and  with  the  lack  of  responsibility  for  the  quality 
of  the  product  were  finally  persuaded  that  the  only  remedy 
for  these  conditions  was  through  combining  a  large  fraction 
of  the  industry  in  one  organization  which  would  enforce 


54  COOPERATIVE    MARKETING 

standards  of  uniformity,  would  be  so  widely  known  to  all 
buyers  as  to  inspire  confidence,  and  which  would  stand  be- 
hind its  goods  after  the  manner  of  any  reputable  business. 
In  other  words  salvation  was  seen  to  lie  in  sound  commer- 
cial methods  rather  than  policies  of  strategy  and  charlatan- 
ism. On,ly  a  comprehensive  organization  for  packing, 
shipping  and  marketing,  one  which  had  a  real  stake  in  the 
business  and  depended  for  its  success  on  building  up  a 
permanent  clientele  could  hope  to  effect  these  reforms. 

It  has  already  been  suggested  that  oranges  must  be  for- 
warded in  a  prompt  and  careful  manner  in  order  to  obtain 
satisfactory  results.  But  what  redress  did  a  single  shipper 
have  when  he  had  suffered  injury  from  the  railroads  ?  The 
carriers,  however,  were  certain  to  be  much  more  particular 
in  their  treatment  of  a  powerful  organization  which  had 
the  machinery  for  detecting  dereliction  on  the  part  of  the 
railroads  and  the  financial  strength  to  prosecute  damage 
claims.  This  became  more  and  more  apparent  to  the 
growers,  and  was  impressed  on  their  minds  whenever  short- 
age of  cars  or  the  wrecking  of  a  fruit  train  occurred.  Then 
there  were  troubles  over  the  types  of  refrigerator  cars  fur- 
nished, over  the  transportation  and  refrigeration  charges, 
and  over  the  privilege  of  diversion.  All  in  all,  the  trans- 
portation problems  showed  a  wide  field  of  endeavor  for 
concerted  as  opposed  to  the  old  dissociated  action. 

The  orange  and  lemon  market  has  always  been  highly 
sensitive.  A  shortage  of  a  few  cars  will  make  the  price 
soar;  a  slight  oversupply  will  cause  a  serious  drop.  An 
amount  of  fruit  for  each  market  rigidly  fixed  within  nar- 
row limits  is  the  condition  on  which  shippers  must  base 
their  marketing  policy.  This  inelasticity  of  demand  makes 
the  risks  of  loss  from  a  glutted  market  great,  risks  which 
were  accentuated  by  the  necessity  for  heavy  outlays  before 
the  favor  of  fortune  could  be  tested  by  putting  the  fruit 


BEGINNINGS    IN    CALIFORNIA  55 

on  the  market.  That  is,  losses  to  the  individual  might  be 
great  or  gains  large.  For  shippers  as  a  whole  there  was 
the  probability  of  obtaining  only  reasonable  profits.  In 
such  a  situation,  the  remedy  against  loss  is  obviously  the 
distribution  of  risk.  For  a  grower  to  pick  a  large  part  of 
his  crop  and  entrust  it  to  the  vicissitudes  of  one  market  at 
any  given  time  was  to  court  disaster,  if  the  market  hap- 
pened to  be  unfavorable.  But  what  else  could  he  do?  As 
soon  as  buyers  were  unable  to  purchase  all  the  crop  and 
thus  assume  the  marketing  risks,  there  was  nothing  left 
but  to  ship  through  a  California  packer  or  commission 
merchant,  or  consign  to  an  Eastern  commission  firm.  What 
the  grower  wanted  was  to  obtain  the  average  price  of  fruit 
for  the  entire  season.  Both  the  justice  and  the  advisability 
of  this  procedure  appealed  to  him.  He  saw  that  if  the  fruit 
of  all  growers  could  be  pooled  the  total  amount  received 
would  certainly  not  be  less  than  that  from  shipping  by  in- 
dividual account,  and  would  probably  be  more  because  of 
more  even  distribution.  He  also  saw  that  with  the  risks 
distributed  he  could  devote  himself  to  producing  good  crops 
rather  than  trying  to  forecast  an  advantageous  time  for 
having  his  fruit  reach  the  market. 

With  at  least  the  rudiments  of  the  foregoing  advantages 
in  mind,  and  prepared  by  a  series  of  experiments  in  co- 
operation, the  growers  met  in  1895  and  formed  the  South- 
ern California  Fruit  Exchange.  This  organization  was 
completely  cooperative  in  principle  and  comprehensive  in 
scope.  From  the  first  it  increased  steadily  in  power  and 
efficiency.  Yet,  as  in  so  many  cases,  the  growers  were 
unable  to  stand  prosperity,  and  in  1903  the  Southern  Cali- 
fornia Fruit  Exchange  combined  with  the  principal  non- 
exchange  shipping  interests  under  the  name  of  the 
California  Fruit  Agency.  About  this  organization  it  is  ex- 
ceedingly difficult  to  gain  accurate  information.    There  was 


56  COOPERATIVE    MARKETING 

a  great  deal  of  objection  to  its  formation,  and  nobody 
seemed  to  know  just  what  it  was  expected  to  do.  Mr. 
Dezell,  now  Assistant  General  Manager  of  the  California 
Fruit  Growers  Exchange,  says  that  so  far  as  he  knows 
the  contract  of  the  California  Fruit  Agency  is  no  longer 
accessible.  Mr.  Dreher,  Vice-President  of  the  Exchange, 
writes :  "I  know  of  nothing  in  print  concerning  the  founda- 
tion of  the  California  Fruit  Agency.  I  was  a  participant, 
although  an  objector,  and  a  minority  member  of  that  forma- 
tion. In  it  the  Exchange  on  the  one  end  and  the  speculative 
shipper  on  the  other  formed  a  general  selling  agency,  each 
factor  handling  its  own  fruit  and  protecting  its  own  opera- 
tions." The  chief  purpose  of  the  agency  seems  to  have 
been  to  sell  as  large  a  percentage  of  the  crop  as  possible 
f.  o.  b.,  California. 

This  "incongruous  combination  of  producers  and  dealers" 
lasted  only  from  April  i,  1903,  to  August  31,  1904,  and 
on  resuming  its  independent  operations  the  Southern  Cali- 
fornia Fruit  Exchange  outlined  its  future  policy  as  follows : 

Upon  the  formation  of  the  California  Fruit  Agency, 
every  effort  was  made  to  sell  the  fruit  f.  o.  b.,  California. 
All  agents  were  instructed  to  push  this  policy,  and  men 
were  employed  as  salesmen  in  the  sales  department  of  the 
agency  who  possessed  ability  and  much  experience  in  that 
line,  and  who  had  been  in  the  employ  of  the  leading  packers, 
as  their  salesmen,  for  many  years. 

Immediately  after  the  California  Fruit  Agency  was  or- 
ganized, April  I,  1903,  f.  o.  b.  orders  for  fruit  (usual  terms 
of  inspection,  etc.)  were  only  received  in  limited  numbers, 
and  not  sufficient  to  move  a  reasonable  percentage  of  the 
crop,  although  climatic  conditions  in  California  were  most 
favorable  to  restrict  shipments.  It  soon  became  necessary, 
in  order  to  move  the  crop,  to  ship  and  attempt  to  make  sales 
in  transit,  or  sell  the  fruit  delivered  at  market  value  at  the 
point  and  time  of  delivery. 

Our  crops  are  now  so  large  that  all  markets  should  be 


BEGINNINGS    IN    CALIFORNIA  57 

constantly  supplied  with  their  full  quota  of  fruit  in  order 
to  consume  the  output.  This  distribution  can  be  better  ac- 
complished by  those  most  directly  interested,  the  growers 
themselves.  The  citrus  fruit  grower  is  no  longer  independ- 
ent of  his  neighbor  as  to  marketing  his  crop,  but  each  one 
is  dependent  upon  the  other,  especially  in  so  far  as  sys- 
tematic distribution  is  concerned. 

The  Southern  California  Fruit  Exchange  is  composed 
only  of  growers,  who  recognize  all  legitimate  dealers  in  the 
trade,  and  who  are  organized  for  the  purpose  of  disposing 
of  their  products  in  all  markets  of  the  country  upon  the 
most  advantageous  terms,  and  to  secure  distribution  to  the 
trade  at  the  least  expense  compatible  with  the  best  service, 
securing  to  the  consumer  the  fruit  at  reasonable  prices,  and 
to  the  grower  the  best  average  returns. 

When  the  Southern  California  Fruit  Exchange  resumes 
its  selling  operations  on  September  i  next,  in  the  absence 
of  other  instructions  from,  or  a  change  in  policy  inaugu- 
rated by  the  growers  themselves,  through  their  repre- 
sentatives on  its  board  of  directors,  the  management  will 
endeavor  to  sell  the  fruit  in  such  manner  as  will  bring  the 
most  money  for  the  product,  confining  itself  neither  to  cash 
sales  in  California,  f.  o.  b.  sales  California  (subject  to  in- 
spection, draft  attached  to  bill  of  lading),  nor  sales  de- 
livered, nor  to  any  other  one  method.  Its  agents  and 
representatives  will  be  instructed  to  secure  all  orders  pos- 
sible for  fruit,  allowing  the  customer  to  take  his  preference 
as  to  whether  he  wants  these  orders  to  be  for  spot  cash, 
f.  o.  b.,  usual  terms,  or  delivered,  subject  of  course  to  the 
confirmation  of  the  Exchange  or  Association  shipping. 

During  the  period  of  the  agency  and  that  immediately 
preceding,  the  citrus  fruit  area  had  been  rapidly  expanding 
in  the  San  Joaquin  Valley  and  elsewhere.  As  the  producing 
area  expanded  the  Southern  California  Fruit  Exchange  also 
extended  its  organization  to  the  new  districts.  The  name 
therefore  became  inappropriate,  so  in  March,  1905,  the 
California  Fruit  Growers  Exchange  was  incorporated,  and 
in  September  of  the  same  year  it  succeeded  to  the  business 


58  COOPERATIVE    MARKETING 

of  the  Southern  California  Fruit  Exchange.  It  is  almost 
invariably  to  the  California  Fruit  Growers  Exchange  that 
people  refer  when  they  talk  about  the  California  system 
of  marketing.  With  the  ground  cleared  by  this  review  of 
the  business  necessities  which  induced  the  growers  to  co- 
operate and  by  the  sketch  of  the  various  methods  of  or- 
ganization attempted  before  they  worked  out  what  appears 
to  be  a  permanent  form  of  cooperation,  we  may  proceed  to 
an  analysis  of  the  structure  of  the  exchange  system. 


CHAPTER  IV 

DEMOCRATIC  ORGANIZATION  OF  THE  COOPERATIVE 
EXCHANGE 

The  series  of  organizations  which  taken  as  a  whole  is 
known  as  the  "exchange"  is  rather  compHcated,  and  there 
are  prevalent  many  erroneous  ideas  about  its  composition 
and  activities.  Even  in  Cahfornia  many  who  have  not  had 
occasion  to  acquaint  themselves  with  its  real  nature  and 
purposes  regard  the  exchange  as  the  orange  trust  instead 
of  what  it  is,  a  democratic  group  of  cooperators.  The  ex- 
change system  is  composed  of  three  principal  constituent 
factors :  the  local  association,  the  district  exchange  and  the 
central  exchange.  While  the  powers  and  functions  of  these 
factors  often  seem  to  the  outside  observer  to  overlap  and 
conflict,  in  practice  the  system  works  with  entire  smooth- 
ness. Perhaps  as  good  a  parallel  to  the  exchange  structure 
as  can  be  found  is  exhibited  by  the  labor  organizations. 
One  typical  form  of  the  latter  is  characterized  by  the  local 
union,  the  national  union  and  the  American  Federation  of 
Labor.  In  each  case  there  is  much  local  authorit}^  and  rela- 
tively little  central  control.  However,  in  the  labor  organiza- 
tions there  seems  to  be  a  tendency  toward  centralization, 
but  in  the  exchange  system  the  central  exchange  has  no 
absolute  authority;  it  is  the  servant  and  not  the  master. 

Turning  now  to  a  study  of  the  local  packing  association 
which  forms  the  foundation  stone  of  the  exchange  structure 
we  find  that  the  most  satisfactory  legal  form  which  an  asso- 
ciation can  assume  is  the  cooperative,  non-capital  stock, 
non-profit  form  of  organization  which  the  laws  of  Cali- 

59 


6o  COOPERATIVE    MARKETING 

fornia  permit.^  There  is  no  need  of  discussing  the  diffi- 
culties and  dangers  rendered  possible  by  the  transfer  of 
shares  to  hostile  interests  when  a  cooperative  organization 
attempts  to  conduct  business  while  organized  as  an  ordinary- 
share  corporation.  The  insurmountable  objection,  as  well 
expressed  by  Powell,"  is  that  ownership  of  shares  gives 
the  legal  right  to  sell  those  shares,  and  since  a  cooperative 
society  by  definition  is  a  group  of  people  who  work  to- 
gether, the  society  should  be  able  to  exclude  those  who 
would  be  unable  to  cooperate  because  of  inherently  con- 
flicting interests.  For  present  purposes  it  is  sufficient  to 
note  that  the  California  law  leaves  the  matter  of  member- 
ship, voting  and  expenses  to  the  discretion  of  each  coopera- 
tive association.  It  also  permits  cooperation  with  other 
corporations  to  be  practiced. 

A  group  of  growers,  therefore,  decide  to  associate  them- 
selves in  the  packing  and  marketing  of  their  fruit.  They 
apply  for  a  non-profit  charter  of  incorporation  which  sets 
forth  the  general  features  of  the  enterprise.^    In  brief,  the 

^  It  should  be  noted  that  most  packing  associations  were  organized 
before  the  enactment  of  the  law  permitting  non-capital  stock,  non- 
profit agricultural  organizations.  Though  wishing  to  pack  and  ship 
on  the  cooperative  principle  they  had  to  organize  as  ordinary  joint 
stock  corporations.  However,  some  associations  have  gone  over  to 
the  non-profit  form,  and  others  are  contemplating  doing  so.  Since 
the  tendency  seems  clearly  in  that  direction,  and  since  the  non-profit 
form  of  organization  shows  citrus  marketing  at  its  best,  that  form 
has  been  adopted  for  detailed  study.  The  California  law  authorizing 
non-profit  cooperative  associations  was  enacted  in  1909  and  may  be 
found  in  State  of  California :  Civil  Code,  James  F.  Deering,  Editor, 
San  Francisco,  Bancroft-Whitney  Co.,  1915,  p.  341  ff.,  articles  353  N- 
353  S. 

2  Powell :     "Cooperation  in  Agriculture,"  pp.  42-44. 

3  The  articles  of  incorporation  and  the  by-laws  of  the  associations 
composing  the  exchange  system  are  quite  similar,  though  of  two 
different  types.  One  type  is  the  stock  corporation  which,  however, 
specifies  cooperative  non-profit  procedure  as  one  of  its  principles ; 
the  other   type   is   the  non-profit  organization.     In   methods   the   two 


CITRUS    GROWERS'    EXCHANGES  6i 

ordinary  citrus  association  charter  gives  the  name  of  the 
corporation,  states  that  its  purpose  is  to  pack  and  market 
citrus  fruits  without  profit  and  to  hold  stocks  or  bonds  of 
other  corporations  marketing  citrus  fruits  or  furnishing 
packing  house  or  orchard  supphes.  After  deducting  ex- 
penses proceeds  are  to  be  distributed  among  the  members 
according  to  the  amount  and  quahty  of  the  fruit  furnished 
by  each.  Voting  power,  contributions  for  the  necessary 
equipment,  and  property  interest  in  the  corporation  are  to 
be  proportionate  to  the  number  of  bearing  acres  that  a 
member  has  entered  in  the  association,  and  on  this  basis 
new  members  may  be  admitted  and  have  the  same  status 
as  old  members.  A  certificate  of  membership  cannot  be 
assigned,  and  an  assignee  can  have  no  rights  or  privileges 
in  the  association  except  as  provided  by  the  by-laws. 

The  real  framework  of  the  association  appears  only  in 
its  by-laws,  and  as  a  preliminary  to  explaining  how  an 
association  actually  carries  on  its  business  and  meets  its 
problems  it  is  essential  to  know  in  detail  what  it  may  and 
may  not  do.  Therefore,  the  important  parts  of  a  set  of 
by-laws  will  be  given,  after  which  comments  and  explana- 
tions based  upon  them  will  be  in  order : 

We,  the  undersigned  members  of  the 

Association,  constituting  a  majority  of  all  the  members  and 
having  more  than  a  majority  of  all  the  votes  of  said  Asso- 
ciation, do  hereby  adopt  the  following  new  by-laws  of  said 
Corporation : 

I.  A  certificate  of  membership  shall  be  issued  to  each 
member,  who  thereunder  shall  have  as  many  votes  at  all 
meetings  as  he  has  bearing  acres  of  citrus  orchards  from 
which  the  fruit  is  being  marketed  through  this  Association. 
The  number  of  such  acres  shall  be  fixed  by  the  Board  of 

types  are  quite  similar,  therefore  a  description  of  one  organization 
applies,  with  certain  modifications,  to  all.  The  most  accessible  cita- 
tion for  the  charter  and  by-laws  of  the  best  type  of  exchange  associa- 
tion is  found  in  Powell,  "Cooperation  in  Agriculture,"  pp.  53-64. 


62  COOPERATIVE    MARKETING 

Directors  from  time  to  time  as  may  be  necessary  or  proper 
and  endorsed  upon  the  margin  of  the  membership  certificate 
respectively  and  a  record  thereof  kept  in  the  books  of  the 
corporation.  Each  member  will  pay  an  initial  fee  of  One 
Dollar  for  each  of  such  bearing  acres,  and  will  further  from 
time  to  time  contribute  his  pro  rata  share  of  all  sums  re- 
quired for  packing  operations  to  be  paid  either  in  cash  or 
by  deductions  from  fruit  sales  as  the  Directors  may  deter- 
mine, but  all  voting  power  of  any  member  shall  cease  when 
he  parts  with  the  control  of  the  orchard  for  which  such 
certificate  was  issued. 

2.  Such  certificates  of  membership  shall  not  be  assign- 
able, and  the  assignment  thereof  shall  not  confer  to  the 
assignee  any  voting  power,  property  right  or  interest  in 
this  corporation  except  when  transferred  in  connection  with 
the  bona  fide  sale  and  to  the  purchaser  of  the  orchard  for 
which  it  was  issued. 

3.  Any  member  of  this  corporation  may  be  expelled  by 
members  representing  two-thirds  of  all  the  votes  of  the 
corporation  for  any  reason  which  may  to  them  seem  suffi- 
cient at  any  general  or  special  meeting,  providing  the  in- 
terest of  such  member  in  the  assets  of  the  corporation  be 
appraised  by  the  Board  of  Directors  and  tendered  in  gold 
coin  to  such  member  w^ithin  sixty  days,  conditioned  only 
upon  the  return  and  cancellation  of  his  certificate  of  mem- 
bership— and  upon  such  expulsion  all  right  of  such  member 
in  said  corporation  ceases. 

4.  This  corporation  will  be  affiliated  with  the  [one  of  the 
district  exchanges]  in  the  marketing  of  its  fruit,  and  will 
avail  itself  of  the  marketing  facilities  of  the  California 
Fruit  Growers  Exchange  and  participate  in  its  manage- 
ment through  such  representatives  as  may  from  time  to 
time  be  authorized. 

5.  All  deductions  which  have  heretofore  been  made  or 
which  may  be  hereafter  made  from  sales  of  fruit  to  meet 
subscriptions  to  the  stock  of  the  [Fruit  Growers  Supply 
Company]  or  other  corporation  furnishing  packing  house 
or  orchard  supplies  for  the  membership,  shall  be  treated  as 
a  packing  charge  ratably  on  all  boxes  of  fruit  packed  during 


CITRUS    GROWERS'    EXCHANGES  63 

the  year  such  subscriptions  were  or  will  be  respectively  paid. 
The  debit  balance  of  such  stock  investment  shall  be  inven- 
toried each  year  as  packing  house  supplies,  and  all  principal 
or  interest  repaid  shall  be  ratably  credited  to  the  boxes 
packed  each  year  as  repaid  respectively. 

6.  The  Board  of  Directors  may  fix  the  boundaries  of 
the  territory  tributary  to  the  packing  house  of  this  Asso- 
ciation from  which  fruit  will  be  received  and  packed,  but 
after  a  member  has  been  accepted  no  change  shall  be  made 
in  boundaries  which  will  exclude  him  without  his  consent 
until  his  property  right  and  interest  in  the  corporation  has 
been  appraised  by  the  Board  of  Directors  and  the  value 
thereof  so  found  paid  to  him  in  gold  coin  on  surrender  of 
his  membership  certificate. 

7.  The  annual  meeting.  .  .  .  The  Secretary  shall  mail 
to  each  member  a  notice  of  said  meeting  at  least  two  weeks 
prior  to  the  date  thereof. 

The  President  of  the  Board  of  Directors  shall  preside.  .  .  . 

At  this  meeting  Directors  shall  be  elected,  who  shall  serve 
for  one  year,  or  until  their  successors  shall  be  elected  and 
qualified;  and  such  other  business  shall  be  transacted  as 
may  properly  come  before  the  meeting.  In  the  election  of 
Directors,  or  the  transaction  of  any  other  business,  each 
member  shall  have  as  many  votes  as  he  has  acres  of  bear- 
ing orchards  marketed  through  this  Association. 

Proxies  may  be  voted  by  any  member  or  representative 
of  a  member,  authorized  in  writing  to  do  so,  such  authority 
having  first  been  filed  with  the  Secretary. 

Special  meetings  .  .  .  ,  and  one-third  of  the  resident  mem- 
bers shall  constitute  a  quorum  to  do  business  at  any  meet- 
ing of  members. 

At  any  such  meeting,  by  a  majority  of  all  votes,  the  office 
of  any  Director  or  Directors  may  be  declared  vacant,  and 
the  meeting  may  at  once  proceed  to  elect  Directors  to  fill 
such  vacancies. 

8.  [The  Directors  shall  organize  themselves  for  business 
by  electing  one  of  their  number  President  and  one  V^ice- 
President.]  They  shall  also  elect  a  Secretary  and  Manager, 
and  designate  such  bank  or  banks  to  act  as  Treasuries  as 
they  may  see  fit. 


64  COOPERATIVE    MARKETING 

9.  The  Board  of  Directors  shall  have  general  manage- 
ment of  the  affairs  of  the  Corporation,  authorize  all  ex- 
penditures, make  all  contracts  and  constitute  the  governing 
power  of  the  Corporation  in  all  matters  of  business.  They 
shall  elect  a  foreman,  and  such  other  employees  as  they 
deem  necessary  to  the  proper  carrying  on  of  the  business 
of  the  Corporation,  shall  fix  their  salaries,  and  define  their 
duties. 

The  Board  of  Directors  shall  enter  into  such  business 
relations  with  the  [district]  Fruit  Exchange  or  other  or- 
ganization forming  a  part  of  the  [California  Fruit  Growers 
Exchange],  for  the  marketing  of  fruit  and  such  other  mat- 
ters as  they  deem  necessary.  .  .  . 

Nothing  in  this  article  shall  be  so  taken  or  construed  as 
to  authorize  any  other  organization  to  incur  any  debt  or 
obligation  on  behalf  of  or  which  shall  be  binding  upon  this 
Corporation,  without  the  full  consent  of  the  Board  of  Di- 
rectors of  this  Corporation. 

In  case  of  damage  from  any  cause  to  any  crop,  the 
Directors  may  exclude  such  orchard,  in  whole  or  in  part, 
from  participating  in  the  benefits  of  this  Corporation.  In 
which  event  the  grower  may  market  such  rejected  fruit  to 
the  best  advantage,  either  through  this  Corporation  on  his 
separate  account  or  otherwise. 

10.  The  Directors  shall  cause  proper  books  to  be  kept, 
showing  the  amount  of  fruit  delivered  by  each  member, 
and  the  variety  and  grade  thereof.  The  books  and  cor- 
respondence of  the  Corporation  shall  be  in  the  name  of  the 
Corporation,  and  each  member  shall  have  access  to  said 
books  and  correspondence  on  any  business  day  during  ordi- 
nary working  hours. 

11.  Any  bona  fide  grower  of  citrus  fruits  properly  tribu- 
tary to  the  packing  house  of  this  Association,  who  shall 
sign  the  contract  hereto  appended,  may  become  a  member 
of  this  Corporation  by  contributing  his  pro  rata  share  of 
the  operating  investment  in  accordance  with  the  Articles 
of  Incorporation. 

12.  It  shall  be  the  duty  of  all  members  of  this  Corpora- 
tion, and  they  hereby  agree,  to  sell  and  market  their  citrus 


CITRUS    GROWERS'    EXCHANGES  65 

fruit  through  the  agency  of  or  by  means  provided  and 
directed  or  by  the  agency  or  agents  selected  and  employed 
by  this  Corporation  only,  and  no  member  shall  be  at  liberty 
to  sell,  market,  or  consign  his  citrus  fruits  through  or  by 
any  other  agency  than  such  as  are  directed  and  provided 
or  selected  and  employed  by  this  Corporation. 

In  case  any  member  of  this  Corporation  does  otherwise 
sell,  market,  or  consign  his  said  citrus  fruits,  his  voting 
power  and  interest  in  this  Association  is  forfeited,  and  he 
shall  immediately  pay  to  the  Treasurer  of  this  Corporation 
the  sum  of  twenty-five  (25)  cents  for  each  and  every  packed 
box  of  commercial  weight  so  sold,  marketed,  or  consigned 
during  the  remainder  of  such  fiscal  year  as  liquidated  dam- 
ages; it  being  impracticable  and  extremely  difficult  to  fix  the 
actual  damages  suffered  by  this  Corporation. 

Every  member  selling  or  shipping  fruit  through  or  by 
means  established  or  authorized  by  this  Corporation  shall 
pay  such  brokerage  per  box  as  may  be  found  necessary  to 
create  such  revenue  as  will  defray  all  expenses  necessarily 
incurred  in  the  conduct  of  the  business  of  the  Corporation. 

It  shall  be  the  duty  of  all  members  to  see  that  their  fruit 
is  picked  and  handled  in  as  careful  a  manner  as  possible, 
and  all  fruit  shall  be  delivered  to  the  packing  house  on  con- 
veyances with  easy  springs.  Any  fruit  handled  in  a  careless 
manner  or  contrary  to  the  above  rule  shall  be  subject  to 
rejection. 

And  when  by  a  majority  of  votes  the  members  have 
adopted  cooperative  picking  of  fruit,  each  member  shall 
have  his  fruit  picked  by  the  Association  at  such  times  and 
in  such  quantities  or  proportion  as  the  Board  of  Directors 
may  direct. 

13.  Any  member  may  withdraw  his  citrus  fruit  for  any 
year  by  filing  a  notice  in  writing  with  the  Secretary  of  this 
Corporation  during  the  first  fourteen  days  of  September  in 
any  year,  stating  that  he  withdraws  his  citrus  fruits  from 
the  control  of  the  Corporation  for  the  next  ensuing  year. 

14.  Picking  orders  shall  be  given  out  pro  rata  as  nearly 
as  possible.  Each  variety  of  fruit  shall  be  graded  according 
to  quality,  and  each  member  shall  receive  credit  for  the 
number  of  pounds  delivered  of  each  variety  and  grade  that 


66  COOPERATIVE    MARKETING 

may  be  established  and  receive  pay  for  same  on  the  basis 
of  what  all  fruit  of  similar  grade  has  been  sold  for,  in  the 
particular  pool  in  which  his  fruit  was  delivered,  less  ex- 
penses. The  net  proceeds  of  sales  shall  be  distributed  pro 
rata  from  time  to  time  as  fast  as  the  returns  become 
available. 

15.  The  funds  of  the  Corporation  shall  be  deposited  upon 
their  receipt  by  the  Secretary  with  the  bank  or  banks  desig- 
nated as  Treasuries,  and  shall  only  be  paid  out  on  warrants 
signed  by  the  President  or  Vice-President  and  the  Secre- 
tary. 

16.  A  brand  or  brands  shall  be  established  which  shall 
be  placed  on  the  end  of  each  box  of  fruit. 

17.  The  Board  of  Directors  shall  have  authority  to  de- 
termine into  what  pools  deliveries  of  fruit  shall  be  divided, 
both  of  oranges  and  lemons.  Members  may  express  their 
preference  in  the  annual  meeting,  and  the  Directors  will 
be  guided  thereby,  but  may  change  same  when  in  their 
judgment  it  becomes  advisable  for  the  best  interests  of  the 
Corporation. 

21.  No  fruit  shall  be  marketed  by  this  Corporation  that 
does  not  come  through  the  ordinary  channels  of  member- 
ship, and  no  member  shall  be  allowed  to  purchase  fruit  out- 
side .  .  .  and  market  it  through  this  Corporation. 

23.  These  by-laws  may  be  amended  or  altered  by  a  vote 
of  two-thirds  of  all  votes  at  the  annual  meeting,  or  at  any 
special  meeting  called  for  that  purpose. 

24.  Nothing  contained  in  these  by-laws  shall  be  construed 
to  interfere  with  bona  fide  sales  of  orchard  property,  to- 
gether with  the  fruit  thereon,  and  any  purchaser  of  such 
property  may  at  his  option,  upon  signing  the  by-laws  and 
contract  and  either  purchasing  the  certificate  of  the  former 
owner  or  contributing  his  pro  rata  share  of  the  operating 
investment,  have  the  same  membership  rights  as  the  origi- 
nal member. 

25.  On  all  questions  as  to  the  interpretation  of  these  by- 
laws, the  decision  of  the  Directors  shall  be  final,  unless 
rescinded  at  a  general  meeting  of  the  Corporation. 


CITRUS    GROWERS'    EXCHANGES  67 

Then  the  growers  sign  the  following  contract  between 
themselves  and  the  association: 

We,  the  undersigned,  growers  of  citrus  fruits,  being  de- 
sirous of  having  our  fruit  handled  in  a  manner  substantially 
as  set  forth  in  the  above  by-laws,  do,   for  such  purpose, 

hereby  severally  constitute  and  appoint  the , 

California,  a  Corporation  organized  under  the  laws  of  the 
State  of  California,  our  sole  agent  to  pack  and  sell  all  citrus 
fruits  which  may  be  grown  on  our  respective  orchards 
during  the  entire  period  of  membership  in  said  Corporation. 
We  and  each  of  us  do  further  agree  that  all  expenses  in- 
curred by  said  Corporation  in  handling  and  marketing  said 
fruits  shall  be  paid  out  of  the  proceeds  of  the  sale  of  said 
fruit  pro  rata,  according  to  the  amount  of  fruit  furnished 
by  each  of  us  respectively,  and  we  and  each  of  us  agree  to 
accept  for  the  crop  our  pro  rata  share  of  the  net  proceeds 
of  the  sale  of  fruit  furnished  by  us,  after  deducting  the  cost 
of  packing,  selling,  and  other  necessary  expenses.  Nothing 
herein  contained  shall  be  construed  to  interfere  with  bona 
fide  sales  of  orchard  property.  Any  and  each  of  us  who 
will  otherwise  dispose  of  the  merchantable  fruit  grown  on 
the  property  hereby  contracted,  during  the  period  of  this 
contract,  shall  pay  to  the  Corporation  the  sum  of  twenty- 
five  (25)  cents  for  each  and  every  packed  box  of  commer- 
cial weight  so  sold,  marketed,  or  consigned,  as  liquidated 
damages,  as  provided  in  the  foregoing  by-laws,  which  are 
hereby  made  a  part  of  this  contract. 

Some  of  the  provisions  of  the  articles  of  incorporation 
and  of  the  by-laws  require  some  elal)oration  to  make  clear 
just  how  a  fruit  association  actually  works,  what  are  its 
problems,  and  how  it  meets  them.  Enough  has  been  said 
to  indicate  that  the  non-profit  form  of  organization  is  highly 
desirable.  If  a  member's  income  depended  on  the  number 
of  shares  of  stock  which  he  owned,  even  if  membership 
were  confined  to  actual  growers,  a  premium  would  be  placed 
on  inefficiency.  If  returns  were  to  be  based  on  acreage 
alone,  a  poor  grower  with  many  acres  would  fare  better 


68  COOPERATIVE    MARKETING 

than  a  grower  who  produced  large  crops  of  good  quahty 
on  a  few  acres.  But  when  proceeds  are  distributed  accord- 
ing to  the  quality  and  quantity  of  fruit  shipped  by  the  asso- 
ciation while  contributions  to  the  equipment  and  packing 
house  are  based  on  acreage  inefficiency  is  penalized. 

Very  properly  the  articles  of  incorporation  are  left  some- 
what vague,  and  the  real  body  of  principles  governing  the 
conduct  of  the  association  is  given  over  to  the  by-laws.  For 
the  by-laws  are  formulated  and  adopted  and  amended  by 
the  members  themselves,  and  with  the  ready  means  of  en- 
trance and  withdrawal  which  most  associations  provide  for, 
one  can  be  certain  that  a  person  belonging  to  an  association 
is  there  because  he  believes  in  the  general  principles  under 
which  the  association  is  governed.  In  short,  a  citrus  asso- 
ciation presents  a  pure  form  of  popular  government,  an 
industrial  democracy.  Associations  have  the  initiative,  the 
referendum,  the  recall  of  officeholders  and  the  recall  of 
judicial  decisions;  they  have  a  kind  of  combination  of  the 
commission  and  the  city  manager  form  of  administration. 

Among  the  most  troublesome  questions  which  confront 
growers  when  considering  the  advisability  of  cooperation 
are  those  related  to  voting  power  and  those  devoted  to  de- 
vising a  plan  by  which  the  financial  burden  of  the  new 
enterprise  can  be  equitably  distributed.  The  "one  man,  one 
vote"  scheme  may  be  satisfactory  in  organizations  in  which 
all  the  members  have  approximately  equal  financial  interests. 
But  in  a  citrus  association  it  is  the  rule  and  not  the  exception 
that  great  inequality  exists.  In  the  same  organization  will 
be  found  the  man  with  a  five  acre  grove  and  the  man  with 
lOO  acres.  The  latter  is  not  likely  to  be  interested  in  a 
cooperative  project  if  his  large  holdings  do  not  receive  pro- 
portionate recognition.  So  the  difficulty  is  obviated,  both 
in  the  ordinary  and  in  the  non-profit  associations,  by  basing 
voting  power  on  the  number  of  bearing  acres  entered  in 


CITRUS    GROWERS'    EXCHANGES  69 

the  association.  When  an  ordinary  corporation  is  formed 
it  is  quite  usual  to  issue  shares  at  a  par  vakie  of  $1,  with 
the  provision  that  each  intending  cooperator  buy  ten  shares 
for  each  acre  of  bearing  orchard.  Under  the  non-profit 
plan  an  entrance  fee  of  $1  or  $10  may  be  charged  for  each 
acre  that  is  entered. 

Though  theoretically  voting  power  is  thus  unequal,  it  is 
quite  common  in  growers'  meetings  for  ordinary  questions 
to  be  decided  by  the  single  "aye"  and  "nay"  method,  but 
any  member  is  free  to  call  for  a  vote  according  to  stock 
ownership  or  acres  entered  in  the  association.  Moreover, 
when  it  comes  to  the  election  of  directors  the  voting  is 
always  by  ballot  and  according  to  acreage.  And  since  the 
election  of  directors  is  usually  the  most  important  item  of 
business  to  be  transacted,  the  large  owner  does  not  feel 
that  his  interests  are  being  put  in  jeopardy  by  an  "aye"  and 
"nay"  vote,  while  the  small  owner  is  not  made  to  feel  his 
insignificance  as  would  be  the  case  if  all  matters  were  de- 
cided by  an  acreage  vote. 

The  equitable  division  of  the  financial  burden  incident 
to  erecting  a  packing  house  and  buying  equipment  is  not 
a  simple  matter.  A  first  class  plant  cannot  be  obtained  for 
less  than  $10,000  and  may  cost  twice  that  amount.  Then 
if  the  association  decides  to  install  a  pre-cooling  plant, 
$50,000  additional  may  be  required.  There  is  little  diffi- 
culty in  organizing  a  cooperative  egg  society  where  the 
necessary  investment  is  small,  but  in  a  citrus  association 
the  financial  stake  of  no  member  is  negligible,  while  the 
outlay  of  the  larger  grower  is  so  considerable  that  his 
allegiance  to  the  cooperative  principle  can  only  be  secured 
if  the  financial  organization  seems  to  him  to  square  with 
substantial  justice. 

Let  us  assume  a  typical  case.  A  group  of  fifty  growers, 
owning  a  total  of  500  acres,  contemplate  forming  an  asso- 


70  COOPERATIVE    MARKETING 

ciation.  Suppose  twenty  growers  own  a  total  of  lOO  acres, 
twenty  others  own  200  acres,  five  own  75,  four  own  80, 
and  one  owns  45  acres.  Now  assuming  that  the  packing 
house  is  estimated  to  cost  $20,000,  it  is  evident  that  a  con- 
tribution of  $40  for  each  acre  of  orchard  would  be  neces- 
sary. In  other  words,  those  owning  on  the  average  five 
acres  would  be  involved  to  the  extent  of  $200  each,  those 
owning  ten  acres  would  be  liable  for  $400  each,  and  so  on, 
until  the  man  owning  forty-five  acres  would  have  to  con- 
tribute $1,800  as  his  share. 

However,  it  is  easily  possible  that  one  of  the  five  acre 
men  owns  a  grove  of  full  maturity  and  heavy  yield  from 
which  he  expects  to  pick  eight  boxes  from  each  of  the 
ninety  trees  on  each  acre,  or  a  total  of  3,600  boxes.  But 
the  forty-five  acre  grove  may  be  but  four  or  five  years  old 
and  just  coming  into  bearing,*  and  the  grower  may  expect 
a  yield  of  less  than  one  box  to  a  tree.  In  such  a  case  the 
man  with  five  acres  would  use  the  facilities  of  the  packing 
house  more  than  the  man  with  forty-five  acres,  though  the 
latter's  contribution  for  the  plant  would  be  nine  times  as 
great.  Besides,  bringing  an  orange  or  lemon  grove  into 
bearing  is  a  long  and  costly  process,  and  just  before  the 
trees  begin  to  make  a  substantial  return  is  likely  to  be  the 
exact  time  when  the  grower  is  least  able  to  undergo  addi- 
tional expense  in  the  form  of  stock  purchases. 

The  illustration  just  given  is,  of  course,  extreme,  and 
was  used  merely  to  bring  out  the  point  that  since  large  dif- 
ferences in  productiveness  in  different  groves  is  the  rule, 
assessment  for  the  plant  according  to  acreage  is  not  entirely 
satisfactory.     On  the  other  hand,  assessment  according  to 

*  In  actual  practice,  four  or  five  years  is  commonly  adopted  as  the 
age  at  which  stock  must  be  taken  in  the  association  if  fruit  is  to  be 
accepted.  The  insignificant  amounts  of  fruit  from  j'ounger  trees  are 
accepted  along  with  a  member's  fruit  from  older  trees  without  addi- 
tional stock  ownership. 


CITRUS    GROWERS'    EXCHANGES  71 

boxes  shipped  is  impossible,  for  would  the  owner  of  the  five 
acre  grove,  valued,  say,  at  $15,000,  submit  to  making  a 
contribution  equal  to  that  of  the  man  whose  forty-five  acre 
grove  is  worth  $45,000?  Probably  the  acreage  system  is 
the  best  that  can  be  devised,  though  imperfect. 

When  a  new  association  is  being  formed  it  is  usual  to 
secure  a  loan  from  a  bank  on  the  note  of  some  of  the  lead- 
ing members  or  upon  the  note  of  the  corporation.  Securing 
a  loan  to  start  a  cooperative  project  is  difficult  in  some  coun- 
tries and  in  parts  of  our  own  country  where  the  members 
have  little  or  no  financial  responsibility.  But  as  stated 
above,  the  orange  growers  are  with  few  exceptions  men 
of  some  means,  and  it  is  perfectly  easy  to  obtain  the  capital 
requisite  for  a  packing  house.  To  the  loan  may  be  added 
the  proceeds  from  entrance  fees  or  sales  of  stock,  but  it  is 
not  usual  for  members  on  starting  an  enterprise  to  build 
and  equip  their  plant  from  assessments  of  members  only, 
without  recourse  to  a  loan.  In  fact,  many  associations 
allow  the  loan  to  continue  indefinitely,  simply  regarding 
interest  charges  as  a  part  of  ordinary  expenses,  while  others 
pay  off  their  indebtedness  by  retaining  a  small  amount  each 
year  from  the  proceeds  of  fruit  sales. 

The  provision  in  the  non-profit  organizations  that  mem- 
bership shall  not  be  transferable  is  wise.  There  is  no  need 
of  dwelling  on  the  dangers  of  allowing  outside  or  opposed 
interests  to  be  represented  in  a  cooperative  association.  In 
the  ordinary  share  corporation  the  same  end  is  accomplished 
by  paying  no  dividends  or  only  ordinary  dividends  on  the 
shares.  If  no  interest  is  paid,  there  is  no  inducement  for 
non-growers  to  try  to  gain  control  over  shares,  or  for 
growers  to  take  out  more  shares  for  each  acre  than  are 
required  by  the  rules  of  the  association.  Besides,  the  issu- 
ance and  transfer  of  shares  is  usually  rigidly  controlled  by 
the  directors  of  the  association.     But  citrus  property  in 


72  COOPERATIVE    MARKETING 

California  changes  hands  with  amazing  frequency  in  com- 
parison with  the  rest  of  the  country,  where  a  farm  often 
stays  in  the  same  family  for  generations.  While  figures 
are  not  obtainable,  fairly  intimate  knowledge  supports  the 
assertion  that  the  average  length  of  tenure  for  citrus  groves 
does  not  exceed  eight  years.  Therefore  it  would  be  un- 
reasonable and  unnecessary  to  make  the  purchaser  of  a 
grove  go  through  the  formality  of  joining  the  association 
and  having  new  certificates  of  membership  issued  for  groves 
that  are  already  in  the  association.  So  the  plan  is  to  have 
certificates  of  membership  apply  to  specified  groves  instead 
of  to  specified  individuals,  and  the  certificates  are  trans- 
ferred to  the  new  owner  by  substituting  his  name  for  that 
of  the  former  owner. 

This  plan  also  means  that  when  a  man  sells  his  orchard 
he  loses  his  interest  and  rights  in  the  association  auto- 
matically, and  he  consequently  has  no  motive  for  not  trans- 
ferring his  certificates  to  the  new  owner.  Instead, 
immediate  membership  in  a  good  association  is  an  added 
inducement  held  out  to  prospective  buyers.  In  addition, 
the  plan  prevents  the  sale  of  certificates  of  membership 
without  the  sale  of  the  grove  for  which  they  are  issued. 
The  plan  is,  then,  both  convenient  and  just,  it  does  not 
impede  bona  fide  sales,  yet  it  adequately  protects  the  integ- 
rity of  the  association's  membership. 

Harmony  within  an  association  is  not  always  maintained. 
Very  substantial  differences  of  opinion  are  constantly  aris- 
ing over  policies  and  over  the  actual  operation  of  the  busi- 
ness. After  the  majority  has  determined  upon  a  certain 
line  of  action,  it  is  not  expedient  that  it  be  nullified  by  one 
or  two  recalcitrant  members.  Suppose,  for  example,  that 
an  association  adopts  a  rigid  picking  requirement  in  order 
to  maintain  its  good  name  for  sound  fruit  on  the  market. 
The  slovenliness  of  one  member  must  not  be  allowed  to 


CITRUS    GROWERS'    EXCHANGES  73 

ruin  the  whole  scheme.  In  other  words,  there  must  be  some 
machinery  for  coercion.  This  is  arranged  for  in  the  rule 
that  permits  expulsion,  provided  the  intractable  member's 
equity  in  the  organization  is  appraised  and  paid.  However, 
expulsions  are  so  few  that  the  rule  is  in  reality  a  dead  letter. 
Members  often  leave  because  of  dissatisfaction,  but  almost 
never  because  of  compulsion. 

Rule  4  merely  provides  that  the  association  shall  be  an 
integral  part  of  the  California  Fruit  Growers  Exchange 
and  can  best  be  treated  in  connection  with  the  descriptions 
of  the  district  exchanges  and  central  exchange.  Rule  5 
refers  to  holding  stock  in  the  Fruit  Growers  Supply  Com- 
pany, a  corporation  owned  by  the  various  associations  and 
whose  function  it  is  to  furnish  packing  and  orchard  sup- 
plies to  members.  The  stock  in  that  corporation  is  paid 
for  by  withholding  one  cent  or  two  cents  a  box  on  all  boxes 
shipped  through  the  association. 

The  power  given  to  the  board  of  directors  to  fix  bound- 
aries of  the  region  within  which  acreage  is  eligible  for 
membership  is  of  the  utmost  importance.  Picture  a  citrus 
area  extending  from  the  foot  hills  down  into  a  broad  valley. 
All  this  territory  may  be  naturally  tributary  to  a  single 
town  in  which  the  packing  house  must  be  established  and 
through  which  the  fruit  must  be  shipi>ed.  The  layman 
would  say  that  the  logical  procedure  would  be  to  erect  and 
equip  one  large  efficient  plant  to  handle  the  whole  output 
of  the  area.  It  is  quite  true  that  a  large  house  can  operate 
at  a  less  unit  cost  than  a  small  one;  yet,  more  likely  than 
not,  instead  of  this  one  house  will  be  found  two  houses  or 
more.  Why  ?  Recalling  the  great  diversity  in  the  pro- 
ducing area  will  furnish  the  clue.  Foot  hill  and  valley 
oranges  are  quite  likely  to  differ  in  color  and  texture.  More 
important  still,  valley  oranges  are  sometimes  frosted  when 
upland  fruit  escapes.    A  house  that  sometimes  ships  frosted 


74  COOPERATIVE    MARKETING 

fruit  cannot  be  expected  to  have  the  best  reputation  on  the 
market,  so  the  foot  hill  growers  may  be  unwilling  to  let 
their  uninjured  fruit  be  sold  through  an  organization  with 
a  compromised  reputation.  Hence  they  organize  a  house 
of  their  own  and  seek  to  establish  a  name  for  perfect  goods. 
Let  us  assume  that  they  succeed  and  that  preference  on  the 
market  is  given  to  fruit  from  their  house.  Their  packing 
house  may  adjoin  that  of  the  original  association  which 
formerly  packed  for  the  whole  region.  Hence  it  is  as  con- 
venient for  any  grower  in  the  whole  region  to  deliver  to 
the  new  house  as  to  the  old.  Obviously  the  result  would 
be  that  growers  would  try  to  join  the  new  association  in 
order  to  share  in  the  better  prices  unless  the  directors  of 
that  association  had  the  power  to  draw  a  certain  fixed  line 
below  which  there  was  danger  of  frost  and  say  that  only 
growers  above  that  line  were  eligible  for  membership  in  the 
new  organization. 

With  reference  to  the  annual  meetings,  it  is  only  neces- 
sary to  note  that  the  rules  are  quite  free  from  technicalities. 
Proxies  are  allowed,  though  an  association  usually  makes 
the  utmost  effort  to  have  all  the  members  present.  Special 
meetings  are  easily  called,  though  they  are  rare,  and  a 
provision  more  interesting  than  important  is  that  which 
states  that  at  any  regular  or  special  meeting  any  director 
or  all  of  them  may  be  recalled  by  a  majority  of  all  votes 
in  the  association  and  their  places  immediately  filled.  That 
is,  if  a  majority  of  the  members  becomes  convinced  that 
the  directors  are  not  properly  handling  the  business  of  the 
association,  all  that  is  necessary  is  to  call  a  special  meeting 
and  turn  the  offenders  out. 

The  annual  meeting  of  the  association  is  a  semi-festal 
occasion  for  the  citrus  community.  It  is  an  open  forum 
with  everybody  welcome.  Beginning  at  9  or  9  -.30  o'clock 
in  the  morning  it  sometimes  continues  till  late  in  the  after- 


CITRUS    GROWERS'    EXCHANGES  75 

noon.  The  orchardists,  their  wives  and  sometimes  their 
children  are  present;  the  local  banker,  editor  and  minister 
are  apt  to  look  in  at  part  of  the  meeting;  members  and 
managers  of  other  associations  are  on  hand,  seeking  point- 
ers; in  fact,  anybody  interested  in  growing  and  packing 
citrus  fruits  is  likely  to  be  seen.  In  order  to  allow  growers 
to  see  what  their  neighbors  in  other  associations  are  doing 
a  kind  of  schedule  of  dates  is  arranged  for  the  meetings 
of  a  district,  but  the  accepted  time  for  all  meetings  is  the 
early  part  of  September,  a  time  when  one  fruit  year  has 
practically  closed  and  l>efore  a  new  one  is  opened. 

The  president  of  the  board  of  directors  is  in  the  chair, 
and  the  meeting  is  organized  by  determining  whether  a 
quorum  is  present  and  what  proxies  are  to  be  recognized. 
Then  the  manager  of  the  association  reviews  the  year's 
activities  in  a  report  which  is  more  or  less  edifying  accord- 
ing as  he  has  or  has  not  literary  and  statistical  skill.  Copies 
of  the  report  or  at  least  the  important  figures  in  the  year's 
operations  are  usually  prepared  and  presented  to  the  mem- 
bers in  advance  so  that  they  can  follow  the  manager's 
thought  intelligently.  After  reviewing  those  general  fea- 
tures of  the  business  which  seem  to  call  for  attention  the 
manager  takes  up  in  detail  the  amount  of  fruit  handled, 
the  cost  of  handling,  the  total  proceeds  from  the  sales  of 
fruit,  the  average  gross  and  average  net  price  a  box.  Com- 
parisons are  likely  to  be  made  with  former  years  to  indicate 
progress  or  to  show  why  the  business  has  not  come  up  to 
previous  records.  Constructive  suggestions  frequently  con- 
clude the  report :  recommendations  that  the  picking  be  more 
rigidly  standardized,  that  new  or  improved  machinery  be 
purchased,  that  the  packing  house  be  enlarged,  that  a  new 
brand  be  established,  or  what  not. 

Following  the  manager,  some  representative  of  the  bank 
which  has  been  designated  as  treasury  reads  a  review  of 


76  COOPERATIVE    MARKETING 

the  financial  standing  of  the  association,  or  the  treasurer's 
report  may  be  read  by  the  manager.  Discussion  about  the 
facts  of  these  reports,  to  the  exckision  of  their  suggestions 
for  changes,  is  then  conducted  till  noon,  when  a  dinner 
together  is  enjoyed  at  the  packing  house.  The  dinner  may 
be  provided  by  the  house  and  superintended  by  the  man- 
ager, or  it  may  be  left  to  the  wives  of  the  members.  At 
the  conclusion  of  a  social  hour,  during  which  the  machinery 
of  the  plant  is  frequently  put  in  motion  in  order  to  illustrate 
its  actual  operation  to  visitors  and  the  women,  the  meeting 
is  reconvened  for  business.  At  the  afternoon  session,  the 
manager  of  the  district  exchange  of  which  the  association 
is  a  member  gives  his  report  and  makes  what  suggestions 
seem  good  to  him.  There  may  also  be  communications 
from  the  central  exchange  or  there  may  be  a  short  address 
or  two  on  subjects  of  interest  to  the  growers. 

Then  occurs  the  most  interesting  time  of  all,  the  time 
when  the  managers'  programs  are  considered,  when  new 
business  of  any  kind  can  be  directly  introduced  from  the 
floor,  when  grievances,  real  or  imaginary,  emerge  from 
their  lurking  places — in  fact,  when  all  the  thoughts  of  the 
growers  are,  so  to  say,  thrown  on  the  table,  assorted,  classi- 
fied and  evaluated.  Orange  growers  are  often  not  more 
reasonable  than  other  classes  of  men,  so  there  is  likely  to 
be  much  futility  and  stupidity  and  perversity  exhibited  at 
this  session  along  with  some  sane  plans  or  wholesome  criti- 
cism. Even  this  inanity,  however,  probably  performs  a 
useful  function,  as  it  shows  the  members  clearly  some  whom 
they  do  not  want  for  directors.  The  managers  of  the  asso- 
ciation and  of  the  district  exchange  often  come  in  for  a 
thorough  grilling,  being  called  to  task  for  past  shortcomings 
and  exhorted  as  to  future  conduct.  Policies  recommended 
by  the  management  are  dissected  and  scrutinized.  Counter 
policies  are  proposed  by  members ;  other  members  bring  out 


CITRUS  GROWERS'   EXCHANGE  j-j 

advantages  and  objections.  Thus  the  meeting  continues  as 
a  kind  of  clearing  house  for  ideas  on  the  citrus  marketing 
problem.  Views  are  classified,  misunderstandings  are  ex- 
plained, improvements  are  adopted. 

During  the  session  given  over  to  discussion  and  new 
business  there  is  sometimes  a  tendency  for  the  more  sub- 
stantial members  to  have  too  little  to  say  and  for  a  few 
noisy,  irascible,  relatively  insignificant  growers  who  are 
very  jealous  of  their  rights  and  privileges  in  the  association 
to  monopolize  too  much  of  the  time.  In  one  way,  this  situa- 
tion is  salutary,  as  the  small  grower  feels  that  he  is  a  man 
of  some  consequence  in  the  association,  a  good  thing  for 
him  and  also  for  the  association;  on  the  other  hand,  the 
house  does  not  always  have  the  advantage  of  listening  to 
the  sounder  business  sense  of  the  larger  and  more  prosper- 
ous of  the  growers. 

Finally,  when  all  wounds  have  been  staunched  or  else 
pronounced  incurable  and  when  the  general  policy  for  the 
succeeding  year  has  been  formulated,  the  meeting  proceeds 
to  the  election  of  directors.  It  is  not  necessary  to  argue 
about  the  importance  of  selecting  an  efficient  board.  On 
the  wisdom  of  this  election  depends  to  a  considerable  degree 
the  prosperity  of  the  whole  community.  Though  the  tenure 
of  office  is  but  one  year,  and  hence  a  full  board  must  be 
elected,  there  are  always  certain  growers  whose  fitness  for 
the  directorship  is  so  obvious  that  their  reelection  is  as- 
sured. Nor  must  it  be  assumed  that  only  the  large  owners 
are  desired  as  directors  by  practically  the  entire  member- 
ship. Frequently  a  man  known  for  his  intelligence  and 
progressiveness  owns  but  a  few  acres  of  orchard  and  de- 
votes most  of  his  time  to  other  pursuits,  yet  everybody 
recognizes  that  his  presence  on  the  board  would  Ije  valuable. 
Often  a  man  with  small  acreage  is  noted  for  producing  un- 
usually large  or  unusually  fine  crops  of  fruit ;  he  too  is  likely 


78  COOPERATIVE    MARKETING 

to  be  selected.  Nevertheless,  all  this  does  not  militate 
against  the  fact  that  the  men  with  relatively  large  holdings 
are  better  represented  on  the  board  than  those  with  small 
holdings.  All  in  all,  however,  the  business  affairs  of  the 
association  can  more  safely  be  entrusted  to  the  prominent 
growers  than  to  any  other  group. 


CHAPTER  V 

CONSTITUTION  OF  THE  CALIFORNIA  CITRUS  GROWERS' 
EXCHANGES 

After  the  election  and  at  the  close  of  the  meeting  the 
newly  elected  board  of  directors  customarily  organizes  for 
business  by  choosing  its  officers.  It  is  desirable  to  select 
as  president  a  man  of  tact  who  can  preserve  harmony  among 
the  members,  a  man  who  is  not  too  closely  tied  down  to 
the  routine  duties  of  his  grove  but  who  can  spend  consider- 
able time  in  behalf  of  the  association  attending  fruit 
growers'  meetings,  attending  the  weekly  meetings  of  the 
California  Fruit  Growers  Exchange  in  Los  Angeles,  and 
generally  being  on  the  alert  for  new  and  improved  methods 
of  growing  and  packing  fruit.  However,  the  choice  of  the 
president  is  of  slight  importance  as  compared  with  the 
choice  of  the  manager.  Indeed,  this  is  the  biggest  single 
act  which  the  board  performs. 

The  California  citrus  associations  have  avoided  one  peril 
that  has  been  the  undoing  of  so  many  cooperative  societies, 
namely,  the  requirement  or  the  custom  that  the  manager 
shall  be  a  member.  A  free  hand  is  given  to  the  directors 
and  they  secure  the  best  manager  that  can  be  had,  regardless 
of  whether  he  is  a  citrus  grower.  Sometimes  a  member 
has  had  the  business  experience  to  fit  him  for  the  position 
of  manager,  and  then  there  is  no  prejudice  to  his  selection, 
but  in  general  it  seems  to  be  more  satisfactory  to  recognize 
that  producing  citrus  fruits  and  packing  citrus  fruits  are 
separate  industries  and  that  specialized  skill  for  the  latter 
is  most  apt  to  be  found  outside  the  ranks  of  the  orchardists. 

79 


8o  COOPERATIVE    MARKETING 

Another  besetting  sin  of  cooperative  societies  is  their  re- 
fusal to  pay  a  salary  sufficient  to  attract  a  manager  with 
high  grade  ability.  This  pitfall  the  citrus  associations  have 
also  escaped.  Salaries  of  $2,000  to  $3,500  are  the  rule, 
and  for  this  sum  competent  men  can  be  secured. 

A  successful  manager  must  be  possessed  of  an  unusual 
number  of  rare  qualities.  In  the  first  place,  he  must  inspire 
enough  confidence  to  hold  his  membership.  Withdrawal 
being  a  simple  matter,  an  association  can  easily  be  wrecked 
if  the  members  become  dissatisfied  with  what  they  believe 
to  be  either  inefficiency  or  arbitrariness.  Just  there  lies  the 
manager's  difficulty:  what  may  appear  autocratic  use  of 
power  to  some  may  be  called  efficiency  by  others.  If  he 
adopts  the  policy  of  letting  the  members  do  pretty  much  as 
they  please,  there  are  sure  to  be  some  who  call  the  plan  not 
freedom  but  slovenliness.  How  can  a  manager  suit  both 
those  who  believe  a  member  should  be  allowed  to  deliver 
fruit  when  he  himself  desires  and  to  any  amount,  and  those 
who  believe  that  the  good  of  the  individual  member  is  best 
served  by  considering  the  good  of  the  association  as  a 
whole,  and  that  the  manager  should  decide  when  a  member 
should  deliver  his  fruit? 

To  an  outside  observer  it  seems  that  a  scientific  orderly 
distribution  of  fruit  cannot  take  place  unless  the  manager 
controls  the  time  and  the  quantity  of  picking.  Probably 
most  managers  feel  the  same  way,  but  they  must  not  apply 
their  belief  to  such  an  extent  that  members  holding  a  dif- 
ferent view  are  antagonized.  The  manager  must  be  broad 
minded  and  fair  minded.  He  must  be  able  to  take  sugges- 
tions from  members  and  from  other  packing  houses  and 
then  go  ahead  as  his  judgment  directs.  Above  all  there 
must  be  no  suspicion  of  favoritism,  for  the  fear  of  discrimi- 
nation is  not  far  beneath  the  surface  in  any  of  the  mem- 
bers, and  an  association  permeated  by  rumors  and  back- 


CONSTITUTION    OF    THE    EXCHANGES     8i 

bitings  cannot  achieve  any  marked  success.  He  must  have 
considerable  administrative  abihty  and  know  how  to  handle 
men.  As  the  packing  house  in  many  ways  resembles  a 
factory,  the  manager  must  possess  technical  skill,  must  be 
able  to  organize  his  mechanical  and  labor  force  efficiently, 
and  besides  superintend  the  wider  business  aspects  of  the 
association,  such  as  buying  supplies  and  keeping  in  touch 
with  the  market.  In  short,  a  loosely  formed  group  such 
as  a  citrus  association  requires  leadership  if  much  is  to  be 
accomplished,  and  the  manager  should  furnish  it. 

There  is  some  reason  for  thinking  that  it  might  be  prefer- 
able to  elect  the  manager  by  a  direct  vote  of  the  member- 
ship rather  than  delegate  the  choice  to  the  board  of  directors. 
If  elected  by  a  popular  vote,  the  manager  might  feel  that 
he  had  more  solid  support  in  his  work.  Members  also  would 
more  readily  follow  the  lead  of  a  manager  whom  they  had 
been  directly  instrumental  in  electing.  But  what  would  be 
the  result  if  two  candidates  for  the  managership  were  al- 
most equally  popular  with  the  members,  if  the  contest  be- 
came keen,  and  one  was  finally  elected  by  a  narrow 
majority?  This  situation  might  easily  arise,  and  in  that 
case  the  association  would  be  in  a  worse  state  than  if  the 
manager  had  been  appointed  by  the  directors.  Another 
point  is  that  a  manager  chosen  by  the  membership  would 
tend  to  take  a  position  of  leadership  in  the  association,  while 
a  manager  chosen  by  the  directors  might  tend  to  be  sub- 
servient to  them,  to  curry  favor  with  them  as  a  bid  to  re- 
appointment, rather  than  care  for  the  interests  of  the 
association  as  a  whole.  In  other  words,  the  manager  is 
in  a  position  to  know  and  should  know  advantageous  pack- 
ing and  shipping  policies  better  than  the  directors,  and  he 
may  be  prevented  from  making  the  best  use  of  his  knowl- 
edge if  he  feels  compelled  to  take  orders  from  an  employer 
in  the  form  of  a  board  of  directors.    However,  we  are  not 


82  COOPERATIVE    MARKETING 

likely  to  settle  the  proper  relation  of  the  executive  to  the 
appointing  power  in  this  place. 

The  directors  have  regular  monthly  meetings  and  special 
meetings  as  required.  Some  associations  pay  the  directors, 
and  some  do  not,  but  the  payment  for  meetings  actually 
attended  is  becoming  more  and  more  prevalent.  A  meeting 
is  regarded  as  spoiling  half  a  day,  so  the  director  receives 
$1.50,  $2  or  $2.50  for  his  half  day's  services.  This  policy 
of  paying  the  directors  has  two  beneficial  effects.  First, 
the  director  is  inclined  to  feel  a  more  binding  responsibility 
and  to  take  a  more  thoughtful  interest  in  the  welfare  of  the 
association  than  if  his  services  were  gratuitous,  or,  as  some- 
times happened,  almost  commandeered.  Second,  a  man  in 
moderate  circumstances,  to  whom  time  is  money,  often  felt 
under  the  system  of  non-payment  that  he  could  scarcely 
afford  to  sacrifice  the  time  which  the  acceptance  of  the 
office  entailed. 

What  kinds  of  problems  come  before  the  directors  and 
how  they  are  handled  may  best  be  set  forth  by  taking  a 
hypothetical  fruit  year  and  following  it  through.  How- 
ever, it  must  be  borne  in  mind  throughout  this  discussion 
that  though  the  resulting  policies  may  be  nearly  identical 
there  is  considerable  difference  in  the  amount  of  initiative 
that  comes  from  the  directors  and  the  manager,  respectively, 
in  the  various  associations.  Among  the  first  things  to  be 
done  in  preparation  for  the  fruit  year,  which  starts  in 
November,  are  the  selection  of  the  proper  subordinate  offi- 
cers, such  as  the  bookkeeper,  foreman  of  the  packing  house, 
foreman  of  the  picking  gang,  etc.,  and  the  purchasing  of 
packing  supplies.  There  is  at  times  difficulty  in  obtaining 
supplies  on  a  moment's  notice,  so  a  provident  house  wishes 
to  get  its  orders  in  early  for  box  shooks,  both  for  picking 
and  packing  boxes,  for  labels  and  wrappers  and  nails,  for 
metal  straps  and  curtains,   for  picking  ladders,   for  new 


CONSTITUTION    OF    THE    EXCHANGES     83 

machinery  or  repairs  for  old,  and  numerous  other  items. 
But  neither  does  the  house  want  to  order  more  suppHes 
than  it  will  need.  Therefore,  at,  say,  their  October  meet- 
ing the  directors  and  manager,  from  their  general  knowl- 
edge of  what  the  crop  is  likely  to  be,  estimate  the  quantity 
of  supplies  that  will  be  needed  and  empower  the  manager 
to  take  measures  for  having  them  on  hand  when  the  pack- 
ing season  begins. 

At  the  November  meeting  account  is  taken  of  the  rate 
at  which  the  fruit  is  maturing  and  how  much,  if  any,  shall 
be  sent  forward  for  the  holiday  market.  In  the  Tulare 
region,  where  the  vast  bulk  of  the  crop  is  shipped  during 
November  and  December,  packing  facilities  run  at  high 
speed  for  this  holiday  period,  but  in  southern  California 
the  association  machinery  does  not  much  more  than  get 
under  way  by  December.  For  the  November  and  December 
pools  or  one  holiday  pool,  as  decided  by  the  directors, 
growers  are  often  allowed  to  contribute  about  the  amounts 
they  wish,  as  it  would  be  impossible  to  furnish  any  great 
amount  of  mature  fruit.  In  December  the  directors  have 
placed  before  them  careful  estimates,  prepared  by  the  man- 
ager, of  all  the  fruit  that  is  likely  to  be  shipped  through  the 
association  during  the  current  year.  The  estimates  are 
prepared  after  the  fruit  is  beginning  to  mature  and  conse- 
quently make  a  showing  on  the  trees  by  requesting  each 
member  to  calculate  with  the  utmost  possible  accuracy  how 
many  field  boxes  of  fruit  his  grove  is  going  to  pick.  Often 
the  manager  or  picking  foreman  makes  an  independent 
estimate  so  as  to  check  the  grower's  results.  These  esti- 
mates may  not  seem  of  much  significance  to  an  outsider, 
but  associations  have  often  lost  thousands  of  dollars  be- 
cause of  inaccurate  calculations.  If  too  large  an  estimate 
is  made  the  crop  is  all  sold  before  the  end  of  the  season 
and  a  demand  left  unsupplied.    If  the  estimate  is  too  small, 


84  COOPERATIVE    MARKETING 

a  surplus  accumulates  at  the  end  of  the  seasorKand  the 
market  is  demoralized  by  too  heavy  shipments. 

With  the  estimates  of  their  own  crop  and  as  accurate 
statistics  as  can  be  had  of  the  total  citrus  crop  both  in  Cali- 
fornia and  Florida  before  them,  the  directors  and  the  man- 
ager undertake  to  predict  the  course  of  the  market.  They 
study  reports  of  their  own  and  others'  movements  of  fruit 
for  past  years,  seeing  what  quantities  were  shipped  at  vari- 
ous times  and  what  prices  were  obtained  for  such  ship- 
ments. Let  us  assume  that  for  a  period  of  years  prices 
had  tended  to  rise  toward  the  end  of  the  navel  season,  say, 
in  May  and  June.  Our  manager  and  directors  know  that 
they  are  in  a  district  where  the  fruit  ordinarily  hangs  on 
well  and  retains  its  quality.  "Now,"  they  say,  "we  shipped 
12  per  cent,  of  our  crop  during  those  months  last  year;  let 
us  retard  our  shipments  to  i6  per  cent,  for  those  months 
this  year  and  take  advantage  of  those  higher  prices."  They 
would  be  very  unwise  if  they  decided  to  hold  over  on  30 
per  cent.,  for  other  associations  might  be  planning  the  same 
move,  or  a  general  underestimate  of  the  crop  might  cause 
the  prices  in  those  months  to  be  lower  instead  of  higher 
than  the  average.  After  taking  everything  into  considera- 
tion the  board  may  conclude  that  it  is  advisable  for  the 
association  to  pick  and  ship  10  per  cent,  of  the  estimated 
crop  during  January.  Therefore  they  order  a  January  pool, 
and  the  manager  notifies  the  members  that  they  are  to  be 
prepared  to  furnish  10  per  cent,  of  their  estimated  crop  to 
that  pool.  That  is,  if  a  member  has  estimated  his  crop  at 
5,000  boxes  he  is  told  that  the  packing  house  will  expect 
500  boxes  from  him  during  January. 

At  the  next  meeting  the  board  will  discuss  whether  the 
crop  gives  indications  of  having  qualities  which  tend  toward 
good  holding  on  the  trees  or  whether  it  would  be  advisable 
to  move  it  as  rapidly  as  possible.     Also  the  market  may 


CONSTITUTION^   OF    THE    EXCHANGES     85 

have  shown  a  definite  preference  for  large  sizes.  Again 
taking  into  account  shipments  from  the  whole  producing 
area,  the  condition  of  the  market  and  the  preferences  of 
members,  the  board  may  decide  to  ship  15  per  cent,  of  the 
estimated  crop  during  February,  picking  principally  the 
large  sizes.  And  so  on  through  the  fruit  year,  the  board 
and  manager  follow  the  rapidity  of  movement  of  the  crop, 
the  manner  in  which  the  fruit  is  standing  up,  the  condition 
of  the  market,  and  on  these  data  determine  upon  a  course 
which  in  their  judgment  will  bring  the  greatest  money  total 
to  the  association  at  the  end  of  the  year. 

Though  the  by-laws  provide  that  the  association  shall 
become  an  integral  part  of  the  exchange  system  by  joining 
one  of  the  district  exchanges  which  is  a  member  of  the 
central  exchange,  they  also  provide  that  these  latter  or- 
ganizations have  no  legal  power  to  contract  debts  binding 
on  the  association  without  the  consent  of  the  directors. 
This  rule  simply  means  that  the  members  intend  to  main- 
tain full  control  over  all  expenses  and  that  if  the  costs  of 
the  district  and  central  exchanges  should  be  believed  to  be 
excessive  the  association  could  withdraw  at  the  end  of  any 
year  without  the  danger  of  having  debts  piled  up  against 
it  by  the  other  organizations. 

Much  more  important  is  the  rule  which  governs  the  power 
of  directors  over  injured  fruit.  This  provision  has  a  thinly 
veiled  reference  to  frozen  fruit  and  windfalls.  Over  such 
fruit  the  power  of  the  board  is  plenary,  and  with  entire 
justice,  because  an  association  cannot  afford  to  risk  its  repu- 
tation for  a  high  grade  article  by  being  compelled  to  accept 
inferior  fruit  for  shipment  under  the  association's  brands, 
even  if  its  rejection  is  an  undoubted  hardship  on  the  un- 
fortunate member.  At  times  there  are  high  winds  which 
sweep  through  narrowly  confined  areas  and  beat  more  or 
less  of  the  fruit  ofif  the  branches.     Obviously  it  is  unfair 


86  COOPERATIVE    MARKETING 

to  the  uninjured  growers  to  sell  these  culls  as  the  output 
of  the  association,  even  if  they  are  all  put  into  low  grades. 
With  frost  the  difficulty  used  to  be  much  more  serious. 
A  few  oranges  of  a  man's  crop  might  have  been  frozen 
and  the  vast  majority  have  remained  sound,  but  as  there 
was  then  no  way  to  distinguish  the  good  from  the  bad 
except  by  cutting  the  fruit  the  entire  crop  would  have  to 
be  condemned. 

Happily,  however,  a  separator  has  recently  been  perfected 
which  infallibly  detects  the  frozen  fruit,  and  there  is  no 
longer  any  reason  for  rejecting  a  grower's  crop  as  a  whole. 
Since  a  member  of  an  association  usually  has  no  other  pack- 
ing connections,  the  association  will  pack,  if  he  so  orders, 
rejected  fruit  of  any  kind  for  a  member  at  a  fixed  charge 
a  box  and  allow  him  to  try  to  dispose  of  it  on  his  own 
account.  The  association's  name  must  in  no  case  be  used 
in  connection  with  such  shipments.  As  a  result,  since  few 
growers  could  command  the  machinery  necessary  to  ship 
on  their  own  account  and  as  it  probably  would  not  be  profit- 
able anyway,  most  fruit  rejected  at  the  house  finds  its  way 
to  the  dump  or  is  sold  at  very  low  rates  to  peddlers  who 
sell  it  in  the  cities. 

Owing  to  the  system  of  pooling  ordinarily  adopted  by 
citrus  associations  accurate  bookkeeping  becomes  very  im- 
portant. At  present  there  is  a  movement  on  foot  which 
contemplates  a  uniform  system  of  accounts  for  all  the  asso- 
ciations within  the  exchange.  Such  a  step  is  wise,  as  no 
local  individuality  would  be  lost  and  complete  comparability 
among  all  the  houses  would  be  gained.  Then  if  the  show- 
ing of  any  house  was  not  up  to  par,  the  members  could 
know  at  once  either  that  the  manager  was  incompetent  or 
that  their  own  cultural  methods  were  at  fault.  The  asso- 
ciations do  not  try  to  surround  with  secrecy  either  their 
methods  or  the  results  obtained.     A  member  is  at  liberty 


CONSTITUTION   OF    THE    EXCHANGES     87 

at  any  time  to  inspect  the  books  and  correspondence  of  the 
association;  and  at  the  end  of  the  fruit  year  the  volume 
of  business  handled  by  the  house,  the  total  and  average 
prices  received,  the  unit  packing  costs,  and  any  other  items 
of  interest  receive  full  publicity  in  the  papers.  This  candor 
on  the  part  of  the  associations  must  receive  the  most  un- 
qualified approval,  for  there  is  little  opportunity  for  chi- 
canery and  bad  faith  to  start  their  corroding  work  as  long 
as  everyone  is  not  only  free  to  inform  himself  of  all  busi- 
ness activities,  but  the  association  even  takes  pride  in  pub- 
lishing its  accomplishments. 

Under  the  non-profit  form  of  organization  any  producer 
of  citrus  fruits  within  the  territory  declared  eligible  by  the 
directors  may  become  a  member  of  the  association  by  paying 
his  proportionate  share  to  the  investment  and  subscribing 
to  the  by-laws  and  contract.  When  the  association  is  or- 
ganized as  an  ordinary  stock  corporation  a  rule  like  the 
following,  Article  VII  of  the  by-laws  of  the  La  Verne 
Orange  Growers'  Association,  is  typical : 

No  person  can  ever  hold  stock  in  this  Corporation  who 
is  not  engaged  in  the  culture  of  citrus  fruits.  .  .  .  The  sale, 
issue  and  the  transfer  of  the  stock  of  this  Corporation  shall 
at  all  times  be  in  the  hands  of  the  Board  of  Directors  and 
under  their  control,  and  no  stock  shall  be  issued  or  trans- 
ferred to  any  person  without  authority  for  such  transfer 
being  given  by  resolution  formally  adopted  by  the  said 
Board  of  Directors. 

Though  this  provision  might  point  toward  exclusivcness 
of  membership  no  such  result  is  to  be  observed  in  practice. 
It  is  simply  a  safeguard  of  the  association  for  securing 
complete  control  over  its  own  membership.  While  the 
ownership  of  stock  gives  a  legal  right  to  dispose  of  it,  the 
danger  of  stock  falling  into  undesirable  hands  is  eliminated 
if  the  directors  must  pass  on  each  sale  of  new  stock  or 
transfer  of  old  and  if  each  share  is  issued  against  a  par- 


88  COOPERATIVE    MARKETING 

ticular  orchard  designated  in  the  certificate.  There  is  rarely 
any  hesitation  about  accepting  an  appHcant  for  admission, 
provided  his  grove  is  properly  tributary  to  the  association 
in  which  he  has  made  application.  On  the  contrary  all  asso- 
ciations are  constantly  on  the  lookout  for  new  members,  as 
a  large  volume  of  fruit  tends  to  reduce  the  unit  packing 
charges  and  added  acreage  lightens  the  acre  apportionment 
of  investment  tied  up  in  the  packing  plant.  Because  of  the 
machinery  requisite  for  the  expulsion  of  a  member  or  for 
the  rejection  of  his  crop  if  worthless,  there  is  little  dis- 
advantage and  much  of  positive  advantage  in  having  a 
wide  open  membership. 

Some  associations  do  very  properly  deny  membership  to 
some  who  would  like  to  join.  But  they  do  this,  not  by  dis- 
criminating against  individual  growers,  but  by  drawing  lines 
of  demarcation  which  separate  areas  which  they  are  willing 
to  include  from  areas  subject  to  frost  or  other  injuries  which 
in  the  judgment  of  the  associations  make  the  fruit  grown 
on  those  areas  an  unsatisfactory  risk.  No  person  has  just 
cause  for  complaint  merely  because  an  association  with  a 
reputation  for  superior  fruit  decides  that  the  district  in 
which  his  grove  is  located  is  not  able  to  produce  fruit  of 
equal  quality  and  therefore  declines  to  extend  the  privileges 
of  membership  to  orchards  in  the  less  advantageous  region. 
More  associations,  however,  adopt  the  philosophy  that  in- 
ferior fruit  takes  care  of  itself  automatically  through  the 
grading  regulations,  and  that  growers  geographically  tribu- 
tary to  a  packing  house  should  not  be  excluded  from  mem- 
bership. For  even  the  fruit  of  poor  growers  is  going  to 
be  shipped,  and  it  will  do  less  damage  to  the  interests  of 
the  growers  as  a  whole  if  sold  through  the  association  than 
if  left  outside,  possibly  to  come  upon  the  market  at  un- 
propitious  times. 

A  rule  against  receiving  new  members,  except  purchasers 


CONSTITUTION    OF    THE    EXCHANGES     89 

of  groves  already  shipping  through  the  association,  or  al- 
lowing disgruntled  members  to  return  during  any  fruit  year 
is  quite  expedient.  After  a  house  has  made  its  plans  for 
handling  a  given  quantity  of  fruit  and  has  bought  supplies 
accordingly,  it  is  not  fair  to  previous  members  to  imperil 
the  efficiency  of  the  organization  by  forcing  a  readjustment 
through  the  inclusion  of  additional  acreage.  Then,  too,  if 
joining  at  any  time  during  the  year  were  permitted  a  situa- 
tion like  the  following  might  easily  arise :  A  grower  would 
decide  to  look  around  and  see  what  offers  he  could  get  for 
his  crop  or  how  he  would  fare  by  consigning  a  car  or  two, 
intending  if  the  results  should  prove  unfavorable  to  retreat 
to  the  shelter  of  the  association.  Let  us  say  that  he  has 
procrastinated  until  the  first  part  of  March  without  selling 
any  fruit.  By  this  time  the  associations  have  probably  sent 
forward  25  per  cent,  of  their  estimated  crop,  knowing  that 
even  distribution  for  the  greatest  possible  number  of  days 
is  the  only  way  to  sustain  the  market  during  the  later 
months.  Moreover,  though  it  is  necessary  to  move  part 
of  the  crop  in  January  and  February,  these  months  are  apt 
to  show  low  prices.  Would  it,  then,  be  just  to  let  a  man 
who  had  refused  to  ship  a  portion  of  his  fruit  for  the  sake 
of  helping  maintain  the  market  gain  by  so  doing,  because 
he  had  his  whole  output  in  reserve,  over  those  who  had 
borne  the  brunt  of  the  fight? 

The  very  fact  that  the  applicant  had  any  fruit  at  all  to 
handle,  assuming  that  he  had  shipped  as  large  a  percentage 
of  his  crop  as  the  association,  would  Inflict  hardship  on  the 
members  by  disturbing  the  equilibrium  of  the  estimate  of 
the  total  amount  of  shipments  on  which  so  much  depends. 
If  a  house  having  400  cars  to  ship  had  planned  to  ship 
half  its  output  by  April  i  and  then  should  admit  a  grower 
who  would  furnish  twenty  cars,  it  would  find  itself  not  with 
50  per  cent,  but  with  55  per  cent,  of  the  original  estimate 


90  COOPERATIVE    MARKETING 

yet  to  be  marketed.  Obviously,  he  must  be  excluded  for 
the  remainder  of  the  season,  be  made  to  shift  for  himself 
and  bear  the  consequences  of  his  selfishness. 

Though  entering  and  leaving  an  association  is  a  simple 
matter  there  is  nothing  indefinite  about  what  is  required 
of  a  member  during  any  fruit  year.  He  is  compelled  to 
deliver  to  the  association's  packing  house  every  box  of  fruit 
grown  on  the  groves  entered  in  the  association  or  pay  dam- 
ages of  twenty-five  or  fifty  cents  for  all  fruit  not  so  de- 
livered. Such  drastic  provisions  are  essential  unless  the 
association  wishes  to  invite  disaster.  After  buying  supplies 
enough  to  pack  a  certain  quantity  of  fruit,  after  organizing 
the  picking,  packing  and  office  force  on  the  expectation  of 
a  certain  output,  an  association  cannot  permit  itself  to  be 
left  in  the  lurch  by  desertions.  Enlistment  in  cooperation 
must  be  voluntary,  but  once  the  campaign  is  on  those  show- 
ing the  white  feather  deserve  no  consideration,  and  should 
be  whipped  into  line. 

The  legal  status  of  this  provision  for  liquidated  damages 
to  be  paid  to  the  association  when  a  member  refuses  to 
deliver  his  fruit  is  somewhat  uncertain,  and  there  is  a  ques- 
tion as  to  what  would  happen  should  a  case  come  before 
a  court.  An  owner  in  a  corporation  cannot  be  penalized 
arbitrarily,  and  this  provision  about  liquidated  damages 
therefore  specifically  states  that  it  is  very  difficult  to  deter- 
mine the  exact  extent  to  which  the  association  would  be 
damaged  by  the  refusal  on  the  part  of  a  member  to  deliver 
fruit.  So  twenty-five  or  fifty  cents  a  box  is  adopted  as 
a  reasonable  estimate  of  the  injury  and  is  acceded  to  on  the 
part  of  both  association  and  grower. 

In  the  early  days  of  the  cooperative  movement  buyers 
and  shippers  would  try  to  lure  members  away  by  offering 
them  a  few  cents  a  box  more  than  they  thought  they  might 
get  through  the  exchange.     But  very   few   buyers   could 


CONSTITUTION    OF   THE    EXCHANGES     91 

afford  to  pay  twenty-five  or  fifty  cents  a  box  more  than 
the  exchange  was  Hkely  to  command,  and  this  much  was 
necessary  before  the  member  could  be  seduced  away  from 
his  association.  Even  yet,  such  a  provision  against  deser- 
tion is  desirable,  for  when  the  market  breaks  badly,  as  it 
is  almost  certain  to  do  at  some  time  in  the  year,  and  a  few 
cars  are  sold  at  little  profit  or  at  a  loss  some  members  are 
easily  panic  stricken  and  might  withdraw  on  the  spur  of 
the  moment  were  it  not  for  the  sobering  effect  of  that  im- 
pending twenty-five  or  fifty  cents  a  box. 


CHAPTER  VI 

ORGANIZATION  OF  PRODUCERS  IN  THE  CALIFORNIA 
CITRUS  INDUSTRY 

Thus  far  in  the  description  of  the  actual  operation  of 
a  citrus  association  the  methods  of  procedure  have  been 
broadly  typical  of  all,  but  on  the  following  point  the  great- 
est difference  exists  both  in  principle  and  in  practice.  This 
point  is  the  power  of  the  association  over  the  picking  and 
delivery  of  fruit.  Of  course,  all  associations  specify  that 
the  fruit  must  be  carefully  picked,  hauled  and  handled  and 
that  fruit  not  so  treated  is  subject  to  fine  or  rejection.  But 
shall  the  associations,  as  represented  by  the  directors  and 
manager,  or  the  individual  grower  decide  the  times  of  pick- 
ing and  the  amounts  that  shall  be  picked? 

The  following  quotation,  Article  XIV,  By-Laws  of  the 
La  Verne  Orange  Growers'  Association,  is  indicative  of 
one  policy: 

Each  stockholder  in  signing  these  By-laws  gives  this 
Corporation  the  sole  and  exclusive  right  and  control  to 
pick,  grade,  pack,  mark  and  sell  the  citrus  fruits  .  .  .  raised 
and  grown  by  him  (or  her)  on  the  lands  described  in  his 
(or  her)  certificate  of  stock,  and  this  Corporation  shall  take 
and  handle  said  fruits  whenever  they  are  in  proper  condi- 
tion for  such  purpose.  .  .  .  Such  fruits  shall  be  delivered  at 
such  packing  house  or  packing  houses  as  this  Corporation 
may  lease,  own  or  control,  at  such  times  as  the  Board  of 
Directors  may  from  time  to  time  designate.  For  any  fail- 
ure on  the  part  of  the  stockholder  so  to  deliver  his  fruit  .  .  . 
he  shall  pay  .  .  .  the  sum  of  fifty  cents  per  box  ...  as  liqui- 
dated damages. 

92 


ORGANIZATION    OF    PRODUCERS  93 

It  is  evident  that  this  association  has  reached  the  con- 
clusion that  the  directors  and  manager  can  calculate  the 
time  of  picking  and  the  most  profitable  quantity,  sizes  and 
varieties  to  be  picked  for  members  better  than  the  members 
can  do  these  things  for  themselves.  If  the  members  did 
not  believe  that  in  the  long  run  they  would  get  larger  re- 
turns for  their  fruit  by  pursuing  this  course  they  would 
obviously  not  delegate  power  over  their  crops  to  the  asso- 
ciation. In  citation  the  rule  appears  more  uncompromising 
than  would  probably  be  the  case  in  practice.  When  for 
any  reason  a  member  wishes  to  contribute  a  larger  or 
smaller  percentage  of  his  crop  to  any  pool  than  is  likely 
to  be  determined  upon  by  the  directors  he  has  the  privilege 
of  filing  such  application  with  the  directors  before  the  pool 
opens,  and  the  directors  are  likely  to  act  favorably  on  the 
application  unless  there  are  specific  reasons  to  the  contrary. 
But  the  important  point  to  remember  is  that  when  a  differ- 
ence of  opinion  about  deliveries  does  arise,  the  directors 
hold  the  final  authority  over  the  fruit  and  can  compel  a 
member  to  comply  with  the  association  policy. 

On  the  other  hand  some  associations  adhere  to  the  idea 
that  the  grower  himself  should  decide  when  to  ship  his  fruit 
and  that  the  function  of  the  directors  and  the  manager  is 
simply  to  see  to  it  that  the  fruit  when  delivered  is  properly 
and  efficiently  packed;  in  short,  that  if  a  member  chooses 
to  deliver  his  whole  crop  in  the  same  month  or  the  same 
week  he  should  have  the  right  to  do  so.  According  to  this 
plan  the  association's  authority  does  not  extend  beyond  the 
packing  house:  it  takes  rather  than  gives  orders.  Instead 
of  being  notified  that  the  association  picking  crew  will  be 
at  his  grove  at  such  and  such  a  day  to  pick  a  certain  number 
of  boxes,  the  member  must  provide  his  own  picking  force 
or  do  the  work  himself.  Under  tlie  first  plan  the  owner 
of  a  grove  cannot  even  join  in  the  labor  of  picking  his  own 


94  COOPERATIVE    MARKETING 

fruit  without  the  association's  permission;  in  the  second 
case  the  association  cannot  pick  an  orange  without  the 
owner's  permission.  It  is  the  famihar  argument:  "Do 
other  people  know  how  to  run  my  business  better  than  I 
do,  and  am  I  to  be  dictated  to  on  my  own  ranch?" 

A  rigid  interpretation  of  the  rule  providing  for  coopera- 
tive picking  might  inflict  hardship  on  a  few  members.  A 
grower  with  five  acres  or  so  could  easily  pick  his  proper 
quota  for  any  pool,  particularly  if  he  had  two  or  three 
sturdy  boys,  and  his  financial  condition  may  make  it  im- 
perative that  he  do  all  of  his  own  work.  Assuming  that 
on  five  acres  he  might  pick  2,250  loose  boxes  and  that  the 
association  would  charge  four  cents  a  box  for  picking,  this 
man  would  save  a  money  outgo  of  $90  by  doing  his  own 
work.  Economy  is  not  an  outstanding  characteristic  of 
the  citrus  growers,  and  many  owners  even  of  small  groves 
take  it  as  a  matter  of  course  that  the  fruit  shall  be  gathered 
by  hired  labor,  but  occasionally  a  member  wishes  to  do  his 
own  work.  Is  there  any  reason  for  forbidding  such  a  mem- 
ber to  do  so? 

Picking  oranges  or  lemons  can  be  done  by  anybody,  but 
it  cannot  be  done  properly  by  anybody.  To  clip  a  smooth 
short  stem  without  causing  an  abrasion  of  the  skin  is  not 
easy,  nor  is  it  entirely  simple  to  transfer  the  fruit  from 
picking  sack  to  lug  box  without  bruising.  Pickers  must  be 
carefully  trained  and  constantly  watched  if  the  best  results 
are  to  be  obtained.  Now  the  ordinary  grower  or  farm  hand 
does  not  possess  this  special  training.  Consequently  his 
fruit  does  not  come  to  the  packing  house  in  as  good  condi- 
tion as  the  fruit  picked  by  the  association.  But  what  of  it? 
Does  not  the  grower  himself  have  to  stand  the  loss  occa- 
sioned by  his  own  inefficiency?  If  he  did,  there  would  be 
little  purpose  in  trying  to  force  progressiveness  upon  him. 
But  his  punctured  and  bruised  fruit  is  mingled  in  the  pool 


ORGANIZATION    OF    PRODUCERS  95 

with  the  sound  fruit  of  others,  and  when  as  a  consequence 
of  his  careless  picking  the  cars  in  which  his  fruit  goes  for- 
ward show  an  excessive  percentage  of  decay  and  are  dis- 
counted by  the  trade,  he  does  not  bear  the  whole  damage  of 
his  misdeeds,  but  it  is  distributed  over  the  entire  member- 
ship. Indeed,  the  larger  growers,  who  invariably  employ 
the  picking  crew,  have  to  assume  the  bulk  of  the  loss,  as 
their  fruit  constitutes  the  majority  of  the  shipments.  Thus 
it  seems  that  control  of  the  actual  picking  should  be  dele- 
gated to  the  association,  for  the  good  of  the  very  grower 
who  objects  to  it,  as  well  as  for  that  of  the  others. 

Another  reason  for  having  the  picking  absolutely  con- 
trolled by  the  house  is  because  oranges  cannot  be  treated 
as  merely  so  many  units  of  a  homogeneous  commodity.  In 
most  fruit  and  vegetable  industries  the  large  fine  specimens 
bring  better  prices  than  the  smaller,  but  this  does  not  hold 
for  oranges.  At  certain  times  the  trade  shows  a  preference 
for  the  larger  sizes,  and  at  other  times  for  the  medium 
sizes.  With  centralized  control  of  picking  a  manager  can 
watch  the  market  and  see  what  sizes  of  fruit  are  command- 
ing the  best  prices.  Then  he  can  order  his  picking  foreman 
to  have  those  sizes  selected  in  a  rough  way,  as  the  crew 
goes  through  a  grove.  Under  individual  control  a  grower 
has  no  very  definite  knowledge  about  the  demands  of  the 
market,  and  simply  delivers  oranges  instead  of  large 
oranges  or  middle  sized  oranges  or  whatever  will  best 
please  the  trade. 

Some  managers  make  sizes  their  specialty  and  indeed 
attribute  a  large  proportion  of  their  success  to  their  ability 
to  anticipate  what  sizes  are  going  to  be  most  in  demand  at 
different  times  in  the  various  markets.  A  concrete  illustra- 
tion would  be  something  like  this :  During  January  and 
February  the  New  England  territory  might  seem  to  prefer 
large  fruit  (this  is  actually  the  case),  so  the  manager  figures 


96  COOPERATIVE    MARKETING 

out  what  percentage  of  his  cars  shipped  during  these  months 
usually  goes  to  New  England.  Then  he  sees  to  it  that 
enough  relatively  large  fruit  is  on  hand  to  load  that  number 
of  cars  with  excess  percentages  of  the  larger  sizes/  This 
plan  has  several  advantages.  First,  the  tree  is  relieved  of 
part  of  its  load  and  may  devote  its  strength  to  the  fruit 
that  is  left.  Second,  large  fruit  is  apt  to  become  coarse 
sooner  than  the  small  fruit  tree  does  if  left  on  the  trees, 
so  gathering  it  early  improves  the  average  quality  for  the 
season.  Third,  smaller  sizes  are  very  often  preferred  over 
the  large  during  the  latter  part  of  the  season,  so  getting 
the  large  fruit  out  of  the  way  may  forestall  later  discrimina- 
tion. True,  picking  to  size  is  more  expensive  and  more 
troublesome  than  taking  the  fruit  as  it  comes,  and  that  is 
the  very  reason  that  individuals  cannot  be  trusted  to  do  it. 
But  the  cent  or  fraction  of  a  cent  a  box  that  is  added  to 
the  cost  of  picking  is  likely  to  be  far  more  than  recouped 
through  pleasing  the  market. 

Some  growers  who  concede  the  reasonableness  of  having 

^  The  trade  regulations  in  regard  to  the  "standard  car"  make  pos- 
sible considerable  variation  in  the  percentages  of  the  various  sizes  of 
fruit  contained  in  the  same  car.  "Standard  car"  is  a  somewhat  variable 
term  in  different  years,  but,  in  general,  a  car  of  oranges  is  expected 
to  contain  not  more  than  lo  per  cent,  each  of  the  96,  112,  and  250 
sizes  and  not  more  than  20  per  cent,  of  the  126  size.  The  remainder 
of  the  car,  or  50  per  cent.,  may  be  divided  at  will  among  the  150,  176, 
200  and  216  sizes.  If  a  car  contains  an  excess  of  the  96,  112,  126  or 
250  sizes  above  the  percentages  noted  for  the  standard  car,  the  dealer 
who  buys  the  car  at  a  given  price  a  box  expects  a  discount  of  twenty- 
five  or  fifty  cents  a  box  on  the  excess.  He  also  expects  a  discount 
of  fifty  cents  a  box  on  all  boxes  of  the  48,  64,  80,  288,  300,  324,  360 
and  420  sizes.  Cf.  U.  S.  Department  of  Agriculture,  Bureau  of  Plant 
Industries,  Bulletin  No.  123,  p.  18.  In  short,  the  very  large  and  very 
small  sizes  are  discounted  by  the  trade.  But  if  a  given  market  de- 
mands large  sizes,  for  example,  an  excess  percentage  of  those  sizes 
above  the  amounts  permitted  by  the  standard  car  may  not  be  dis- 
counted. Hence  arises  the  opportunity  for  a  manager  to  employ  mar- 
keting strategy  in  connection  with  sizes. 


ORGANIZATION    OF    PRODUCERS  97 

the  fruit  picked  by  experienced  gangs  deny  that  it  is  proper 
for  the  association  to  determine  the  quantity  to  be  picked 
at  any  given  timfe.  This  controversy  affects  much  more 
vitally  the  framework  of  the  cooperative  organizations.  It 
is,  in  essence,  the  old  controversy  between  centralization  and 
decentralization.  A  complete  answer  to  this  problem  will 
have  to  be  deferred  until  the  exchange  system  as  a  whole 
has  been  described,  but  at  this  point  a  few  aspects  of  the 
controversy  are  pertinent.  First,  what  are  the  effects  of 
adopting  the  method  of  individual  initiative?  In  this  case 
the  association  merely  exercises  the  function  of  an  agent : 
it  receives  the  fruit  which  is  picked  at  the  pleasure  of  the 
grower,  packs  it,  and  turns  it  over  to  the  selling  agency. 
No  particular  marketing  policy  can  be  worked  out  if  the 
grower  has  complete  freedom  of  delivery.  If  a  half  way 
policy  is  adopted  and  the  directors  have  the  power  to  desig- 
nate pools  to  which  they  advise  that  certain  percentages  be 
contributed  many  growers  will  take  the  advice,  and  a  be- 
ginning can  be  made  toward  a  marketing  policy.  Complete 
independence  of  the  grower  is  a  possibility,  and  such  in- 
dependence was  the  common  method  of  procedure  during 
the  early  days  of  the  cooperative  movement.  As  an  ex- 
ample of  the  difficulties  this  system  involves,  however,  it 
is  evident  that  an  association  could  book  few  orders  for 
delivery  at  specified  dates,  for  if  members  did  not  happen 
to  bring  in  fruit  at  the  proper  time  the  orders  that  had  been 
taken  could  not  be  filled. 

When  the  association  controls  the  movement  of  fruit  the 
situation  is  quite  dift'erent.  Now  a  definite  campaign  can 
be  mapped  out,  and  the  directors  can  decide  in  advance, 
subject  to  revision  according  to  the  vicissitudes  of  the  sea- 
son, what  fruit  shall  \)e  shipped,  and  when  and  where,  so 
as  to  obtain  the  maximum  returns  for  the  crop  as  a  whole. 
Under  the  individualistic  system  the  sale  of  a  few  cars  at 


98  COOPERATIVE    MARKETING 

high  rates  will  cause  an  influx  of  fruit  to  the  packing  houses 
and  will  inevitably  result  in  a  congested  market.  Under 
the  centralized  system  a  strong  market  does  not  materially 
alter  the  season's  plans.  At  most  a  few  readjustments  are 
made  and  the  plant  is  speeded  up  a  bit.  Under  the  first 
system  low  prices  at  the  first  part  of  the  season  would  mean 
small  shipments  and  in  fact  shipments  might  be  retarded 
so  long  that  low  prices  would  obtain  for  the  entire  year 
through  an  overloaded  market  during  the  later  months,  for 
after  a  certain  time  the  fruit  must  be  sent  forward,  low 
prices  or  not.  Under  the  second  system,  even  with  low 
prices  ruling  at  the  first  of  the  season  a  due  proportion  of 
the  crop  would  be  moved,  and  this  might  bring  about  a 
very  strong  market  during  the  later  months.  In  this  case 
the  average  prices  for  the  whole  year  might  be  reasonably 
satisfactory,  while  under  the  first  plan  the  results  would 
be  disastrous.  The  spurious  independence  achieved  by  a 
grower's  retaining  the  pride  of  authority  over  his  own  ship- 
ments is  too  dearly  bought  when  the  disruption  of  orderly 
scientific  distribution  is  the  price  paid.  Neither  are  half 
measures  sufficient.  Cooperation  has  not  shown  its  full 
possibilities  until  an  association  has  entire  control  over  its 
output  and  can  enter  the  lists  to  build  up  a  constituency  of 
regular  customers  in  the  markets,  in  the  same  manner  that 
any  other  efficient  and  successful  business  proceeds. 

Cooperation  is,  to  a  large  extent,  an  attitude  of  mind : 
it  is  the  ability  to  take  a  fair  minded  view  of  a  whole  situa- 
tion. The  individualist  sees  his  immediate  advantage;  the 
true  cooperator  sees  his  advantage  only  as  a  part  of  the 
welfare  of  the  whole  industry  or  even  society  in  general. 
The  individualist  sees  nothing  wrong  in  trying  to  calculate 
in  what  particular  week  of  the  season  the  market  will  reach 
its  maximum  and  aiming  to  have  his  whole  crop  there  at 
that  time;  he  does  not  pause  to  reflect  that  if  everyone 


ORGANIZATION    OF    PRODUCERS  99 

followed  the  same  course  there  would  probably  be  no  citrus 
industry.  The  cooperator  has  the  fairness  of  mind  to  see 
that  if  the  whole  crop  is  to  be  sold  the  market  must  be 
maintained  even  when  prices  are  not  attractive,  and  that 
it  is  no  more  than  right  that  he  bear  his  part  of  the  burden 
as  well  as  reap  his  share  of  the  reward.  He  realizes  that 
his  own  welfare  depends  ultimately  on  the  prosperity  of 
the  industry  as  a  whole,  and  he  is  willing  to  make  his 
equitable  contribution  to  the  support  of  the  industry.  In 
numerous  talks  with  growers  these  ethical  considerations 
have  come  out  clean  cut  and  with  an  enthusiasm  that  was 
refreshing.  Not  only  do  these  cooperators  adopt  the  prin- 
ciple of  fairness  for  themselves,  but  they  soundly  berate 
those  who  seem  not  yet  to  have  reached  the  same  plane  of 
industrial  morality. 

Membership  in  a  citrus  association  continues  only  during 
the  pleasure  of  the  member.  As  there  is  no  pressure  to 
bring  a  grower  into  the  cooperative  relationship,  neither 
is  there  any  pressure  to  continue  the  ties  after  he  desires 
their  relaxation.  This  is  one  of  the  most  attractive  features 
of  the  whole  cooperative  movement  in  California.  Those 
who  have  worked  out  the  system  have  had  the  good  sense 
to  realize  that  weakness  and  not  strength  would  result  to 
the  organizations  if  members  should  be  retained  against 
their  will.  In  these  organizations  the  only  formality  to 
withdrawal  is  the  filing  of  notice  with  the  secretary  during 
a  specified  period  or  before  a  certain  date  of  any  year. 
Withdrawal  of  fruit  from  the  association  need  not  com- 
pletely sever  relations  between  the  member  and  the  associa- 
tion. He  may  retain  his  equity  in  the  corporation  (though 
not  his  voting  power)  and  merely  not  avail  himself  of  its 
facilities.  At  any  subsequent  time  he  can  resume  his  full 
privileges  simply  by  stating  that  he  will  ship  through  the 
association  during  the  following  year.     Some  associations 


loo  COOPERATIVE    MARKETING 

provide  that  after  withholding  his  fruit  for  a  certain  num- 
ber of  years  a  member's  rights  automatcially  cease,  and 
he  is  not  entitled  either  to  compensation  for  his  contribu- 
tions to  the  society  or  to  payment  for  his  stock. 

These  provisions  for  withdrawing  fruit  from  the  control 
of  the  association  for  a  year  or  more  are  not  mere  dead 
letters.  It  is  the  rule  and  not  the  exception  for  an  asso- 
ciation to  have  some  non-shipping  acreage  on  its  books. 
When  for  any  reason  a  member  becomes  dissatisfied  and 
thinks  he  can  do  better  by  employing  other  packing  and 
marketing  agencies  he  has  nothing  to  do  but  try.  And  since 
it  is  impossible  for  an  association  always  to  please  every- 
body, somebody  is  continually  deciding  to  try.  As  a  rule 
the  deserters  soon  return,  and  their  very  defections  are 
likely  to  prove  a  benefit  to  the  association,  for  it  should  be 
reasonably  clear  to  an  outsider  that  after  a  man  ships 
through  the  association,  then  through  other  channels,  then 
returns  to  the  association  something  besides  sentiment  is 
indicating  that  the  cooperative  method  is  most  advan- 
tageous to  the  grower. 

A  more  complete  description  of  the  methods  of  grading 
and  making  payments  will  best  be  left  till  the  pooling  ar- 
rangements are  studied.  Now  it  need  only  be  said  that  the 
associations  do  a  strictly  cash  business,  and  that  growers 
receive  their  returns  about  a  month  after  delivering  their 
fruit.  The  funds  are  ordinarily  handled  through  a  bank 
and  disbursed  on  warrants  signed  by  the  president  and 
secretary  of  the  association. 

Each  packing  association  adopts  brands  for  its  various 
grades  of  fruit.  These  brands  are  lithographed  on  more 
or  less  attractive  labels  which  are  pasted  to  the  ends  of  the 
packing  boxes.  For  present  purposes  we  may  assume  that 
an  association  has  three  brands,  one  for  its  fancy  grade, 
one  for  its  choice,  and  one  for  its  standard.    Like  any  other 


ORGANIZATION    OF    PRODUCERS         loi 

progressive  business,  the  association  aspires  to  win  and 
hold  attention  to  these  brands.  For  that  reason  the  quaHty 
in  each  brand  is  made  as  uniform  and  rehable  as  possible. 
The  brands  are  the  property  of  the  association,  and  cannot 
be  used  without  its  sanction.  More  than  once  it  has  oc- 
curred that  an  association  has  felt  that  it  could  not  compro- 
mise its  reputation  by  shipping  under  the  regular  brands 
fruit  slightly  below  par,  but  still  merchantable,  so  it  has 
adopted  temporary  labels  not  showing  the  association  name 
and  has  thus  sold  its  output  without  tarnishing  its  good 
repute  with  the  trade.  Recently  quite  a  controversy  has 
arisen  over  the  matter  of  brands,  but  this  may  best  be  con- 
sidered with  the  discussion  of  the  achievements  of  the  ex- 
change system. 

All  through  this  chapter  passing  references  have  been 
made  to  pools.  We  must  now  turn  to  the  purpose  of  these 
pools,  their  organization,  their  effect  on  the  whole  coopera- 
tive structure.  For  pooling  is  without  question  one  of  the 
essentials  of  the  exchange  system.  In  the  first  place,  why 
should  there  be  any  pools  at  all  ?  Or  why  not  have  one  gen- 
eral pool  instead  of  several?  It  is  entirely  conceivable  that 
each  member's  fruit  be  kept  distinct,  be  packed  and  sold 
on  individual  account,  and  the  actual  proceeds  obtained  for 
his  particular  fruit  be  returned  to  him.  In  fact,  this  used 
to  be  done  somewhat  extensively.  Now,  however,  a  grow- 
er's fruit  ordinarily  loses  its  identity  after  it  has  been 
graded  and  weighed. 

Generally  speaking,  pooling  is  an  insurance  measure,  and 
the  policy  of  several  pools  rather  than  one  is  a  measure 
of  administrative  convenience.  The  cooperative  principle 
would  lose  much  of  its  significance  if  it  did  not  include  the 
distribution  of  risk.  Under  the  system  of  consigning  or 
selling  to  packers  the  individual  account  method  was  tried 
thoroughly,  and  was  proved  a  failure.     If  the  prices  that 


I02  COOPERATIVE    MARKETING 

buyers  on  the  Eastern  market  offered  invariably  were  re- 
flections of  the  quality  of  the  fruit,  the  individual  account 
plan  would  be  ideal.  Efficient  growers  would  be  rewarded ; 
careless  growers  would  be  penalized.  But  unfortunately 
this  condition  does  not  obtain.  Prices  are  a  reflection  of 
the  quantity  of  fruit  that  happens  to  be  on  the  market  at 
any  given  time  much  more  than  of  the  quality  of  that  fruit. 
It  was  to  get  away  from  the  sight  of  good  fruit  returning 
red  ink  at  one  time  while  poor  fruit  brought  fabulous  re- 
turns at  another  that  the  cooperative  enterprises  were 
launched.  Under  individual  account,  a  grower  might  face 
a  deficit  for  the  season  during  a  fairly  successful  year  for 
the  industry  as  a  whole. 

If  every  possible  precaution  had  been  taken  in  growing, 
picking  and  packing  and  if  the  time  of  shipment  had  been 
selected  with  the  utmost  care  it  is  entirely  conceivable  that 
each  shipment  of  a  given  individual  might  fall  on  a  de- 
moralized market.  And  these  might  be  the  only  poor  mar- 
kets of  the  season.  Under  collective  shipment  such  a  condi- 
tion could  not  occur.  Though  all  of  one  member's  crop 
might  happen  actually  to  sell  below  cost  he  would  be  af- 
fected only  to  the  extent  that  these  low  prices  reduced  the 
general  average  for  the  pool.  Insurance  against  unavoid- 
able risk  is  too  well  accepted  a  principle  to  need  defence, 
and  we  may  proceed  at  once  to  the  less  obvious  advantages 
and  some  of  the  disadvantages  of  the  pooling  system. 

If  each  member  contributed  exactly  his  proportionate 
quota  every  time  the  directors  made  a  requisition  for  fruit, 
that  is,  if  every  time  the  directors  decided  that  it  would  be 
advisable  to  ship  a  certain  percentage  of  the  fruit  each 
member  should  contribute  that  percentage  of  his  crop,  there 
would  be  no  particular  objection  to  having  but  one  pool 
during  the  season.  But  for  various  reasons  members  do 
not  contribute  equal  percentages.    For  example,  one  mem- 


ORGANIZATION    OF    PRODUCERS         103 

ber's  crop  may  mature  early  and  he  may  desire  to  ship  to 
the  holiday  market,  while  another  man  may  have  no  fruit 
ready  to  pick.  If  the  market  should  be  especially  good  for 
holiday  fruit  it  would  not  be  fair  to  wait  till  the  end  of 
the  season,  strike  an  average  for  all  the  fruit  sold  during 
the  year  and  pay  each  member  according  to  the  relation 
his  total  number  of  pounds  of  fruit  has  to  the  total  weight 
shipped  by  the  association.  Those  members  who  did  not 
have  their  fruit  ready  for  the  early  market  would  have  no 
right  to  share  the  advantage  of  their  more  painstaking  or 
more  fortunate  fellows,  and  members  who  did  not  ship 
to  this  market  should  not  be  called  upon  to  bear  a  loss  if 
one  has  been  incurred. 

Even  in  the  later  pools  contributions  cannot  be  exactly 
equal.  After  a  member  has  contributed,  say,  10  per  cent, 
of  his  crop  to  the  holiday  pool  and  another  has  contributed 
nothing,  there  is  no  common  base  on  which  to  proceed  for 
the  rest  of  the  season.  If,  beginning  in  ]?.nua.Ty,  each 
should  contribute  the  same  percentage  at  the  call  of  the 
directors  the  first  would  be  out  of  fruit  when  the  second 
still  had  10  per  cent,  to  ship.  Then  there  are  often  special 
reasons  why  a  member  is  allowed  to  deliver  more  or  less 
than  the  general  percentage  to  a  pool.  Suppose  that  the 
directors  believe  that  the  best  interests  of  the  association 
require  the  shipment  of  20  per  cent,  of  the  crop  during 
March.  It  is  immaterial  to  them  where  this  fruit  comes 
from,  so  if  certain  members  want  to  deliver  more  than  that 
percentage  and  others  less  there  is  no  reason  against  accom- 
modating both  groups.  But  if  all  wanted  to  ship  more  or 
all  wanted  to  ship  less,  then  the  directors  would  exercise 
their  authority  and  require  each  member  to  deliver  his  due 
proportion  of  fruit. 

Pools  have  a  general  tendency  to  conform  to  the  monthly 
schedule,  that  is,  there  is  the  January  pool  and  the  February 


I04  COOPERATIVE    MARKETING 

pool.  But  during  the  rush  season  of  March  and  April  when 
shipments  are  very  heavy  and  the  market  is  likely  to  show 
wide  fluctuations  the  time  of  the  pool  may  be  shortened. 
Besides,  there  are  general  pools,  open  pools  and  voluntary 
pools.  The  open  pool  is  most  frequently  used  in  connection 
with  odd  varieties  where  but  few  boxes  are  shipped  during 
the  entire  season.  In  this  case  all  the  returns  for  the  season 
are  divided  by  the  total  number  of  pounds  sold  to  find  the 
rate  at  which  members  shall  be  paid.  The  time  of  the  sale, 
therefore,  is  immaterial.  Grapefruit,  seedlings,  Mediter- 
ranean sweets  and  St.  Michaels  are  often  handled  in  this 
manner.  The  open  pool  means  that  the  directors  merely 
specify  dates  between  which  growers  may  deliver  as  much 
or  as  little  as  they  see  fit.  This  arrangement  is  often  used 
at  the  opening  and  close  of  the  fruit  season  when  shipments 
will  perforce  be  very  light.  Voluntary  pools  are  little  dif- 
ferent. To  them  a  member  contributes  or  not  as  he  pleases, 
but  he  must  not  exceed  a  certain  percentage  of  his  estimate. 
This  is  a  favorite  device  for  a  holiday  pool. 

A  pool,  then,  as  the  term  is  used  in  the  citrus  industry, 
signifies  the  quantity  of  fruit  that  is  delivered  to  an  associa- 
tion by  all  members  between  two  specified  dates.  The  fruit 
does  not  retain  any  definite  connection  with  its  grower  but 
is  commingled  with  all  deliveries  and  is  sold  not  in  the  name 
of  the  owner  but  in  the  name  of  the  association.  Hence  the 
owner  does  not  know  what  price  was  paid  for  his  particular 
product  and  his  dividends  depend  on  the  relation  that  the 
number  of  pounds  of  his  contribution  to  the  pool  bears  to 
the  total  number  of  pounds  included  in  that  pool.  In  other 
words,  total  proceeds  for  the  fruit  delivered  to  a  pool  are 
divided  by  the  total  number  of  pounds  to  find  the  rate  a 
pound  which  the  fruit  brought;  then  each  grower's  share 
is  computed  by  multiplying  the  number  of  pounds  he  fur- 
nished by  this  rate  a  pound. 


ORGANIZATION    OF    PRODUCERS         105 

Thus  far  no  account  has  been  taken  of  differences  in  the 
quality  of  fruit  contributed  by  various  members  to  the  pool. 
Obviously  it  would  be  unfair  if  a  producer  of  fine  fruit 
received  merely  the  same  rate  for  each  pound  of  his  crop 
as  a  careless  grower  got  for  his.  The  problem  is,  therefore, 
how  can  the  advantages  of  pooling  be  combined  with  recog- 
nition and  reward  of  efficiency?  The  answer  is  found  in 
the  grading  rules.  Growers  do  not  receive  a  flat  rate  a 
pound  for  all  fruit  shipped  in  any  pool,  but  a  different  rate 
a  pound  for  each  grade,  and  the  rate  is  only  the  same  to 
all  growers  for  the  same  grade.  That  is,  proceeds  from 
the  sales  of  cars  are  not  lumped  together.  Each  grade  has 
a  separate  account,  and  only  prices  for  the  same  grade  for 
the  duration  of  the  pool  are  reduced  to  a  rate  a  pound. 
It  follows  that  since  the  higher  grades  bring  the  best  prices 
a  grower  with  a  large  proportion  of  good  fruit  will  receive 
larger  total  returns  than  will  a  poor  grower  for  the  same 
weight  of  fruit. 

This  leads  to  a  difficulty  that  is  constantly  arising  with 
associations.  Members  whose  fruit  continually  grades  low 
are  likely  to  become  restive,  and  at  times  even  charge  dis- 
crimination against  themselves  on  the  part  of  the  manager 
or  directors.  For  it  is  characteristic  of  most  farmers  to 
believe  their  individual  product  equal  or  superior  to  that 
of  their  neighbors.  Then,  when  one  member  finds  that 
ordinarily  only  10  per  cent,  of  his  crop  is  graded  as  fancy, 
while  another  member  secures  20  per  cent,  fancy,  and  that 
the  fancy  grade  brings  a  substantial  premium  a  pound  over 
the  lower  qualities,  he  is  much  more  apt  to  shout  fraud  than 
to  hunt  for  his  own  shortcomings  as  a  grower.  His  dis- 
satisfaction may  work  itself  out  in  two  very  different  man- 
ners. If  impetuous  and  unreasoning,  he  is  quite  likely  to 
withdraw  from  the  association.  If  thoughtful  and  teach- 
able he  comes  to  the  conclusion  that  discrimination  against 


io6  COOPERATIVE    MARKETING 

him  by  the  manager  would  be  a  short  sighted  policy  and 
one  not  likely  to  occur,  and  indeed  one  very  difficult  of 
accomplishment  even  if  the  manager  should  have  malignant 
intentions.  So  the  chastening  suspicion  enters  his  mind 
that  after  all  maybe  his  fruit  is  not  the  equal  of  his  neigh- 
bor's, and  then  it  is  a  short  step  to  the  determination  to  im- 
prove his  cultural  methods  until  his  percentages  in  the 
higher  grades  are  the  equivalent  of  anybody's.  In  fact, 
the  policy  of  publicity  adopted  by  the  California  cooperative 
associations  allows  each  grower  to  know  how  his  results 
compare  with  those  obtained  by  others,  and  there  is  often 
keen  rivalry  within  an  association  to  see  who  can  secure 
the  highest  percentages  in  the  best  grades — a  situation 
wholesome  both  for  the  membership  and  for  the  associa- 
tion as  a  whole. 

But  an  opportunity  for  endless  bickering  is  presented 
unless  the  manager's  power  over  grading  is  absolute  and 
incontrovertible.  After  the  number  of  grades  and  the  gen- 
eral characteristics  of  each  have  been  determined  by  the 
membership  as  a  whole  at  the  annual  meeting  or  by  the 
directors,  the  decision  of  the  manager  in  any  specific  case 
must  be  final,  if  internal  dissensions  are  to  be  minimized. 
Yet  even  with  grading  completely  controlled  by  the  man-, 
ager  there  remains  some  possible  basis  of  controversy. 
Within  a  given  grade  there  is  always  more  or  less  diversity 
of  quality:  some  oranges  graded  fancy  will  inevitably  be 
superior  to  others  included  within  the  same  grade.  And 
one  grower's  fancy  fruit  may  on  the  whole  excel  that  of 
another.  For  differences  in  soil,  humidity  of  the  atmos- 
phere, altitude  and  cultural  methods  all  exert  their  varying 
degrees  of  influence  on  quality. 

Moreover,  the  prices  obtained  for  any  grade  depend  on 
the  average  quality  of  all  the  fruit  included,  so  if  one  or  two 
members  habitually  excel  all  their  fellows  in  quality  they 


ORGANIZATION    OF    PRODUCERS         107 

will  not  receive  full  rewards  for  their  superiority.  The 
especially  fine  article  merely  raises  the  average  price  which 
would  otherwise  have  been  received  for  the  fruit  at  the 
lower  edge  of  the  grade,  and  the  inferior  fruit  included 
renders  it  impossible  to  obtain  the  full  market  price  for  the 
superior  qualities. 

Two  results  may  follow :  first,  an  exceptionally  skilled 
grower  may  become  wearied  of  continually  holding  up  the 
market  for  careless  neighbors  who  are  willing  to  produce 
inferior  fruit,  and  the  skilled  grower  may  allow  his  product 
to  deteriorate  to  the  general  level.  Second,  a  shiftless 
grower  may  be  content  to  allow  the  better  fruit  of  the  other 
members  of  the  association  to  hold  the  average  prices  of 
the  various  grades  up  to  a  remunerative  level.  In  either 
case  the  results  are  unjust  and  injurious,  for  good  fruit  is 
the  only  guarantee  of  a  stable  market,  and  anything  that 
tends  to  lower  cultural  standards  must  be  condemned. 

However,  there  is  a  means  of  escape  from  the  dangers. 
If  the  association  is  composed  of  members  of  similar  cul- 
tural skill,  having  groves  on  similar  soils  and  with  similar 
physical  environment,  the  product  will  be  sufficiently  homo- 
geneous to  warrant  assembling  and  marketing  in  common 
without  inflicting  injury  on  any  grower.  Therefore  it  is 
advisable  for  an  association  to  include  in  its  membership 
only  those  growers  whose  product  is  essentially  similar.  If 
in  the  same  community  there  tend  to  be  variations  in  the 
style  or  quality  of  the  fruit,  as  is  very  frequently  the  case, 
it  is  better  to  organize  two  or  more  associations  than  to 
attempt  to  pool  dissimilar  fruit  under  the  same  brands 
through  one  organization.  In  actual  practice  there  have 
been  numerous  examples  of  a  group  of  growers  withdraw- 
ing from  one  association  and  organizing  another  because 
they  were  unwilling  to  ship  their  first  class  fruit  along  with 
the  poorer  product  of  others. 


io8  COOPERATIVE    MARKETING 

Even  if  there  is  no  special  dissatisfaction  within  the  or- 
ganization it  is  not  wise  to  let  an  association  become  so 
large  that  the  business  as  a  whole  overshadows  its  con- 
stituent elements,  namely,  the  individual  members.  Unless 
the  personal,  enthusiastic  loyalty  of  each  member  is  elicited, 
hopes  for  marked  success  are  likely  to  prove  illusory.  An 
association  must  have  a  reasonable  output  or  the  unit  costs 
of  conducting  business  will  be  unnecessarily  great. 

In  general,  the  California  associations  number  between 
fifty  and  150  members,  include  300  to  1,200  acres  of  bear- 
ing orchard,  and  have  annual  shipments  of  175  to  850  cars 
of  fruit.  Associations  of  medium  size  are  often  more  suc- 
cessful than  the  large  ones. 

Most  of  the  discussion  of  methods  of  picking,  grading 
and  pooling  has  been  based  on  the  practice  in  regard  to 
oranges,  chiefly  because  oranges  constitute  85  per  cent,  or 
more  of  the  total  shipments  of  citrus  fruits.  Now  some- 
thing may  be  said  about  lemons.  The  general  principles 
that  should  govern  a  cooperative  society  of  course  apply 
to  a  lemon  association.  But  it  is  much  more  common  to 
find  associations  that  pack  both  oranges  and  lemons  than 
it  is  to  find  associations  devoted  exclusively  to  lemons.  On 
the  other  hand,  numerous  houses  pack  only  oranges. 
Lemons  are  often  raised  as  an  adjunct  to  the  orange  busi- 
ness, that  is,  an  orchardist  may  have  a  couple  of  rows  of 
lemon  trees  as  a  border  around  his  orange  grove,  or  he 
may  have  two  or  three  acres  of  lemons  in  a  citrus  property 
of  ten  or  twenty  acres.  Yet  there  are  other  growers  who 
devote  themselves  exclusively  or  principally  to  lemons. 

Since  lemons  are  maturing  all  the  year  through,  it  is 
quite  common  to  pick  them  every  month,  and  divide  the 
year  into  pools  corresponding  with  the  calendar  months. 
Though  the  association  picking  gang  may  at  times  attend 
to  the  picking  of  a  member's  lemons,  it  is  not  the  rule  nearly 


ORGANIZATION    OF    PRODUCERS         109 

as  much  as  with  oranges.  Where  a  grower  has  but  a  few 
boxes  to  dehver  every  month  there  would  be  little  reason 
in  summoning  the  picking  crew,  so  the  grower  does  the 
work  himself  or  has  it  done  by  men  in  his  own  employ. 
In  the  handling  of  lemons  there  is  no  real  problem  about 
the  times  of  delivery.  They  must  be  picked  as  they  mature, 
hence  there  is  little  need  for  machinery  compelling  mem- 
bers to  deliver  their  pro  rata  share.  Only  when  members 
do  not  pick  and  deliver  their  fruit  with  reasonable  regular- 
ity does  the  association  interfere  in  order  to  protect  the 
common  welfare. 

Instead  of  being  shipped  as  soon  as  possible  after  de- 
livery, as  are  oranges,  lemons  are  put  through  a  more  or 
less  protracted  process  of  curing  and  are  sometimes  not 
marketed  for  several  months.  Curing  is  accomplished  by 
storing  the  fruit  under  good  ventilation  at  certain  rates  of 
temperature  and  humidity,  and  is  undertaken  for  the  pur- 
pose of  bringing  out  the  color  (most  lemons  are  picked 
while  green  in  color),  for  toughening  the  skin  and  for  im- 
proving the  keeping  qualities.  Because  of  this  interval 
between  picking  and  selling,  returns  on  lemons  are  not  re- 
ceived nearly  so  quickly  as  on  oranges.  Also  the  fact  that 
the  lemon  trees  must  be  picked  over  so  much  more  fre- 
quently than  oranges  and  the  fact  that  the  fruit  must  be 
cured  make  the  unit  cost  of  picking  and  packing  a  box  of 
lemons  much  higher  than  for  a  box  of  oranges.  Therefore 
a  house  that  handles  both  fruits  usually  keeps  separate  ac- 
counts, for  it  would  obviously  be  unfair  to  the  members 
who  grow  nothing  but  oranges  to  compute  a  flat  unit  cost 
of  picking  or  packing  by  adding  all  costs  and  dividing  by 
the  total  number  of  all  oranges  and  lemons  handled. 

This  whole  study  of  picking,  grading  and  pooling  may 
be  concluded  by  assuming  a  typical  case  and  following  it 
through  the  various  processes.     Again  considering  oranges 


no  COOPERATIVE    MARKETING 

only,  let  us  say  that  an  association  through  its  board  of 
directors  and  manager  declares  a  March  pool  and  decides 
it  is  for  the  best  interests  of  all  concerned  to  move  20  per 
cent,  of  the  crop  during  that  month.  The  manager  an- 
nounces by  telephone  to  the  member  that  the  picking  crew 
will  arrive  at  his  ranch  at  such  and  such  a  time  to  pick  20 
per  cent,  of  his  estimated  crop,  and  that  certain  varieties 
and  certain  sizes  are  wanted.  It  is  then  incumbent  upon 
the  grower  to  procure  from  the  packing  house  field  boxes 
and  ladders  enough  to  keep  the  gang  amply  supplied  and 
to  distribute  them  in  those  parts  of  his  grove  from  which 
he  desires  the  fruit  to  be  taken.  He  also  is  responsible  for 
hauling  the  gathered  fruit  to  the  packing  house.  Then  the 
crew,  often  Japanese,  under  the  direction  of  its  foreman 
comes  and  begins  work.  Each  picker  has  his  own  number, 
which  he  must  place  on  each  box  he  fills,  so  that  responsi- 
bility for  careless  work  can  be  readily  placed.  And  to  en- 
courage the  pickers  to  put  quality  first,  they  are  often  paid 
by  the  day  rather  than  by  the  box.  Perhaps  four  cents 
would  be  a  fair  average  of  the  cost  of  picking  a  box  when 
done  in  this  manner.  After  the  same  fashion  the  gang 
moves  through  the  district  picking  for  each  member  in 
turn.  Of  course,  some  large  houses  operate  several  gangs, 
and  these  would  not  be  likely  to  work  on  the  same  ranch 
at  the  same  time,  as  the  owner  would  have  difficulty  in 
hauling  the  fruit  as  rapidly  as  picked. 

With  delivery  at  the  packing  house  the  last  vestige  of 
control  of  the  fruit  by  its  owner  ends.  After  passing 
through  the  washer  or  brusher,  the  fruit  is  carried  on  belts 
before  graders  who  inspect  each  separate  orange  and  decide 
by  color,  texture,  form  and  weight  into  what  class  it  shall 
go.  Passing  on,  the  fruit  is  automatically  weighed  and 
recorded,  each  grower  being  credited  with  a  certain  number 
of  pounds  of  each  grade.     After  his  fruit  passes  the  scales 


ORGANIZATION  OF  PRODUCERS    in 

the  grower's  identity  is  lost,  for  the  oranges  are  carried 
over  automatic  sizing  machines  and  into  bins  in  which  fruit 
from  many  growers  may  be  awaiting  packing.  The  oranges 
are  then  wrapped  in  tissues  bearing  the  association  name, 
and  a  definite  number  of  any  given  size  are  packed  in  each 
box;  the  box  is  covered,  cleated  and  strapped,  and  is  then 
ready  for  loading  or  for  pre-cooling. 

Let  us  assume  that  a  certain  grower's  contribution  to  the 
pool  in  question  was  i,ooo  loose  boxes,  averaging  forty-five 
pounds  each.  Suppose  that  i6  per  cent,  or  7,200  pounds 
qualified  for  the  fancy  grade,  60  per  cent,  or  27,000  pounds 
for  choice,  20  per  cent,  or  9,000  pounds  for  standard,  and 
4  per  cent,  or  1,800  pounds  were  thrown  out  as  culls.  When 
all  the  fruit  picked  in  that  pool  has  been  sold  the  total  pro- 
ceeds for  each  grade  will  be  divided  by  the  total  weight 
of  fruit  of  each  grade  to  determine  at  what  rate  the  grower 
is  to  be  paid.  Let  us  suppose  the  first  grade  averaged  net 
to  the  association  $2  a  hundred  pounds,  the  second  grade 
$1.75,  the  third  $1.50,  while  the  culls  were  sold  to  local 
peddlers  at  $.25  a  hundred  pounds.  Our  grower's  equity 
in  the  pool  would  therefore  be  $144,  plus  $472.50,  plus 
$135,  plus  $4.50,  or  a  total  of  $756.  But  the  expenses  of 
picking  and  packing  must  be  deducted  before  the  grower 
can  be  paid.  At  four  cents  a  box  the  picking  would  amount 
to  $40,  and  at  thirty-two  cents  a  packed  box  (1,000  loose 
boxes  would  pack  about  645  boxes),  the  packing  costs 
would  be,  say,  $200.  The  grower  therefore  would  receive 
a  warrant  for  $516  as  his  share  of  the  pool. 

The  rule  forbidding  the  association  to  market  any  fruit 
not  furnished  by  the  members  needs  little  explanation.  It 
simply  is  a  preventive  measure  to  keep  the  cooperative  or- 
ganization from  becoming  an  ordinary  fruit  speculating 
concern.  The  foundations  of  cooperation  would  soon  be 
undermined  if  members  had  the  possibility  of  buying  fruit 


112  COOPERATIVE    MARKETING 

which  they  did  not  grow  on  the  prospects  of  making  a  profit 
by  selling  it  again  through  the  facilities  furnished  by  the 
association.  Profits  on  growing  and  not  on  merchandizing 
must  be  the  ideal  of  the  growers. 

Flexibility  is  given  to  the  citrus  organizations  by  pro- 
viding for  reasonably  easy  amendments  to  the  by-laws.  In 
short,  the  theory  on  which  the  associations  are  built  is  that 
no  rule  should  be  binding  over  the  members  unless  it  is 
desired  by  a  substantial  majority. 

Again  the  question  of  transfers  of  property  comes  up, 
showing  how  important  a  part  it  plays  in  the  citrus  industry. 
What  would  be  the  status  of  a  crop  growing  in  a  grove 
which  a  member  had  entered  in  an  association  for  the  next 
fruit  year  if  the  grove  should  be  sold?  Would  the  new 
owner  be  compelled  to  ship  this  crop  through  the  associa- 
tion or  pay  damages  even  if  he  preferred  to  ship  otherwise? 
Very  wisely  the  provision  is  made  that  a  bona  fide  sale  of 
an  orchard  cancels  all  agreements  about  the  crop,  though 
the  new  owner  if  he  wishes  may  assume  the  certificate  of 
the  former  owner  and  ship  through  the  association  even 
though  it  be  the  very  middle  of  the  fruit  year,  while  a  grove 
that  did  not  belong  to  a  member  could  not  be  entered  in  an 
association  except  at  the  end  of  a  fruit  year. 

The  recall  of  judicial  decisions  is  adopted  as  a  principle 
by  providing  that  the  membership  at  any  general  meeting 
may  rescind  any  decision  made  by  the  board,  though  the 
directors'  decision  is  otherwise  final. 

In  conclusion,  therefore,  the  local  packing  association 
may  be  described  as  a  group  of  growers  organized  on  strictly 
democratic  and  cooperative  principles  for  the  purpose  of 
marketing  citrus  fruits  and  for  no  other  purpose.  Some 
associations  are  organized  as  non-profit  corporations  under 
the  new  California  law ;  many  are  organized  as  ordinary 
stock  corporations  but  limit  the  holding  of  stock  to  actual 


ORGANIZATION    OF    PRODUCERS         113 

growers  and  also  have  some  provision  like  the  following, 
from  the  Articles  of  Incorporation  of  the  La  Verne  Orange 
Growers'  Association : 

It  is  fully  understood  and  agreed  between  the  members 
of  this  Corporation  that  it  it  is  not  an  incorporation  for 
profit,  .  .  .  and  it  is  well  understood  and  agreed  between 
all  the  parties  signing  these  Articles  of  Incorporation  that 
this  is  purely  a  cooperative  association. 

The  tendency  within  the  association  is  clearly  toward 
more  centralized  control  and  toward  constantly  enlarging 
the  powers  of  the  directors  and  manager.  As  the  efficiency 
of  the  associations  is  enhanced  by  this  policy  of  centraliza- 
tion it  is  to  be  commended  in  so  far  as  an  autocracy  or  an 
oligarchy  is  not  created.  Abuse  of  power  is  prevented  by 
the  initiative,  the  referendum,  the  recall,  and  the  recall  of 
judicial  decisions,  and  this  popular  government  is  kept 
virile  and  effective  by  keeping  the  associations  from  be- 
coming unduly  large.  In  short,  popular  control  and  effi- 
ciency seem  to  be  reconciled  to  a  marked  degree  in  these 
cooperative  societies. 


CHAPTER  VII 

THE  GROWERS'  SELLING  AGENCY 

When  the  fruit  is  loaded  on  the  cars  the  direct  responsi- 
bihty  of  the  local  packing  association  ends,  and  succeeding 
operations  are  controlled  by,  or  at  least  through,  the  dis- 
trict selling  exchange.  It  is  this  second  of  the  three  funda- 
mental branches  of  the  exchange  system  that  now  demands 
attention.  Like  the  local  association,  it  is  a  corporation 
which  is  not  organized  for  the  purpose  of  paying  dividends. 
But  while  the  packing  association  ordinarily  has  a  consider- 
able investment  in  its  plant,  the  district  exchange  has  but 
a  nominal  paid  up  capital  and  owns  no  property  except 
its  office  fixtures.  The  principal  function  of  the  district 
exchange  is  to  sell  the  fruit  of  certain  local  packing  asso- 
ciations which  delegate  to  it  this  power.  One  fundamental 
fact  to  be  kept  in  mind  is  that  the  district  exchange  could 
have  no  independent  existence  apart  from  the  associations 
which  constitute  its  members,  but  the  local  associations 
are  entities  without  reference  to  the  existence  or  non-exist- 
ence of  district  exchanges.  Not  only  is  the  district  ex- 
change expected  to  devote  its  chief  attention  to  selling,  but 
it  is  required  to  sell  in  a  specified  manner,  namely,  through 
the  facilities  that  are  furnished  by  the  California  Fruit 
Growers  Exchange. 

It  is  evident  that  a  district  fruit  exchange  is  a  rather 
unique  organization.  It  owns  neither  fruit  nor  marketing 
facilities,  yet  it  may  handle  hundreds  of  thousands  of  dollars 
worth  of  business  during  the  year.  In  the  form  of  or- 
ganization the  district  exchange  much  resembles  the  local 

114 


THE    GROWERS'    SELLING   AGENCY       115 

association,  but  its  members  or  stockholders,  instead  of 
being  individuals,  are  the  associations  themselves.  The 
manner  in  which  district  exchanges  arise  is  as  follows : 
Several  packing  associations  in  a  more  or  less  distinct  geo- 
graphical area  unite  to  form  a  separate  organization  which 
is  to  sell  the  fruit  of  all  the  member  associations.  Some 
of  these  exchanges  have  but  two  or  three  member  associa- 
tions and  one  has  eighteen,  but  the  average  membership 
is  about  seven.  There  are  no  hard  and  fast  rules  for  de- 
termining the  boundaries  of  the  various  exchanges,  the 
guiding  principle  simply  being  that  a  selling  exchange  has 
a  better  chance  to  serve  its  members  satisfactorily  if  the 
fruit  which  it  is  called  upon  to  market  is  somewhat  similar 
in  general  characteristics.  However,  there  is  nothing  what- 
ever to  prevent  associations  with  very  dissimilar  outputs 
from  forming  a  district  exchange  if  they  see  fit. 

As  was  done  with  the  packing  association,  let  us  take 
a  typical  district  exchange  and  trace  through  its  structure 
and  mode  of  procedure.  The  structure  need  not  long  de- 
tain us.  The  district  exchange  has  no  stockholders  or  mem- 
bers except  one  elected  representative  from  each  association. 
All  of  these  elected  representatives  are  directors,  and  each 
has  voting  power  on  questions  of  policy  proportionate  to 
the  number  of  packed  boxes  which  his  association  sells 
through  the  exchange.  The  directors  of  the  local  associa- 
tion annually  elect  their  director  to  serve  on  the  district 
exchange.  Frequently  the  president  of  the  board  or  the 
manager  of  the  association  is  chosen.  Consequently  the 
local  associations  control  absolutely  the  policy  of  the  dis- 
trict exchange,  and  no  policy  could  possibly  be  pursued 
which  did  not  command  the  support  of  the  associations. 
For  the  local  directors  instruct  their  representative  on  the 
district  exchange  and  are  in  turn  held  accountable  by  the 
growers  for  what  goes  on  within  the  district  exchange  as 
well  as  within  their  own  packing  house. 


ii6  COOPERATIVE    MARKETING 

When  the  representative  of  the  association  is  chosen  the 
voting  power  over  the  association's  nominal  stock  in  the 
district  exchange  is  assigned  to  him.  Then  the  various 
delegates  organize  a  new  board  of  directors,  electing  a 
president,  manager,  etc.  It  follows  that  the  president  and 
all  of  the  directors  of  the  district  exchange  must  be  mem- 
bers of  some  local  association,  but,  adopting  the  practice 
of  the  local  associations,  the  directors  of  the  district  ex- 
change do  not  necessarily  elect  one  of  their  own  number 
for  manager.  The  manager  of  the  district  exchange  is  so 
vital  to  the  prosperity  of  the  section  which  he  serves  that 
it  would  be  suicidal  to  limit  in  any  way  the  selection  for 
the  place.  Business  ability  of  a  high  order  is  essential,  and 
it  must  be  secured  wherever  it  may  happen  to  be  found. 

The  district  exchange  is  undoubtedly  the  least  understood 
element  of  the  exchange  system,  so  its  structure  will  be  re- 
capitulated before  proceeding  to  its  functions.  A  group  of 
packing  associations,  say,  seven,  in  a  given  producing  area 
form  a  corporation  which  is  to  market  the  fruit  for  all. 
Each  of  these  associatipns,  through  its  board  of  directors, 
elects  one  representative  to  act  as  a  director  in  the  district 
exchange.  These  elected  representatives  are  the  directors 
and  only  stockholders  of  the  exchange,  control  its  policy  for 
the  benefit  of  their  local  associations,  and  are  responsible 
to  their  respective  associations.  Each  director's  voting 
power  in  the  exchange  is  determined  by  comparing  the 
number  of  boxes  shipped  by  the  association  which  he  repre- 
sents with  the  total  number  of  boxes  shipped  through  the 
district  exchange. 

A  basis  for  further  study  of  the  district  exchange  may 
best  be  gained  from  an  examination  of  the  contract  between 
it  and  the  local  associations : 

Whereas,  the  system  of  marketing  and  handling  citrus 
fruits  devised  by  the  California  Fruit  Growers  Exchange 


THE    GROWERS'    SELLING   AGENCY       117 

has  been  approved  by  the  parties  hereto  as  a  satisfactory 
system  of  cooperative  marketing.  Now,  in  consideration 
of  the  foregoing,  the  parties  of  the  second  part  [the  local 
associations]  do  hereby  severally  agree  to  market  all  fruit 
controlled  by  them  or  that  may  hereafter  come  under  their 
control  during  the  term  of  this  agreement  through  said  first 
party  [the  district  exchange],  it  being  understood  and 
agreed  that  the  said  party  of  the  first  part  has  entered  into 
an  agreement  with  the  California  Fruit  Growers  Exchange 
for  the  sale  of  said  fruit  in  accordance  with  the  general 
plan  adopted  by  said  exchange,  to  which  plan  and  agree- 
ment reference  is  hereby  made,  and  the  same  is  hereby  made 
a  part  of  this  agreement. 

The  said  party  of  the  first  part  is  hereby  authorized  to 
retain  as  brokerage,  from  the  net  proceeds  rendered  to  it 
by  the  agents  of  the  California  Fruit  Growers  Exchange, 
or  from  any  other  sales  of  fruit  under  this  agreement,  such 
sum  of  money  as  their  Board  of  Directors  may  from  time 
to  time  designate  or  deem  sufficient  to  cover  the  expense 
incurred  in  making  such  sales.  Should  the  actual  expenses 
incurred  by  the  said  party  of  the  first  part  during  the  term 
of  this  agreement  amount  to  less  than  the  fund  derived 
from  the  brokerage  so  retained,  then  the  surplus  shall  be 
refunded  to  the  said  parties  of  the  second  part,  according 
to  the  number  of  boxes  of  fruit  shipped  by  each.  .  .  . 
Oranges,  lemons  and  other  citrus  fruit,  as  well  as  auctions 
and  agents'  sales,  may  be  assessed  on  a  separate  basis,  and 
for  different  amounts. 

Provided  that  whatever  difference,  if  any,  is  made  by 
the  California  Fruit  Growers  Exchange  in  its  charges  for 
marketing  oranges,  lemons  and  other  citrus  fruit,  respec- 
tively, shall  be  followed  and  carried  out  in  the  adjustment 
of  moneys  retained  by  the  party  of  the  first  part  from  the 
said  parties  of  the  second  part. 

The  party  of  the  first  part  agrees  to  use  its  best  efforts 
to  sell  and  dispose  of  the  fruit  controlled  by  the  said  parties 
of  the  second  part,  but  it  is  expressly  understood  that  in  so 
doing  it  acts  only  as  the  agent  of  the  said  parties  of  the 
second  part,  and  assumes  no  responsibility  or  financial  lia- 
bility therefor  further  than  it  agrees  to  turn  over  to  the 


ii8  COOPERATIVE    MARKETING 

several  parties  of  the  second  part,  the  cash  proceeds  of  all 
sales  of  their  fruit  as  soon  as  received,  retaining  the  broker- 
age for  expenses,  as  above  provided. 

The  parties  of  the  second  part  further  agree  to  pay  to 
the  party  of  the  first  part  as  liquidated  damages  the  sum 
of  twenty- five  cents  a  box  on  all  citrus  fruits  controlled  by 
them,  which,  through  any  fault  of  their  own,  they  fail  to 
deliver  to  the  party  of  the  first  part,  loaded  on  cars  at  ship- 
ping station  of  said  party  of  the  second  part. 

.  .  .  Provided,  that  any  of  the  parties  hereto  may  with- 
draw from  and  cancel  this  agreement  during  the  first  fifteen 
days  of  August  in  any  year,  by  giving  notice  in  writing 
during  said  period  to  the  party  of  the  first  part. 

As  indicated  in  the  above  agreement,  the  operations  of 
the  district  exchange  are  so  intimately  connected  with  the 
activities  of  the  California  Fruit  Growers  Exchange  that 
an  explanation  of  most  of  them  must  perforce  be  postponed 
until  the  latter  organization  is  described.  However,  a  few 
points  in  the  agreement  call  for  discussion.  First,  it  should 
be  noted  that  the  agreement  is  between  corporations  and 
not  individuals.  In  fact,  the  district  exchange  is  a  kind 
of  reversed  holding  company,  for  instead  of  the  holding 
company  controlling  the  constituent  corporations,  in  this 
case  the  constituent  corporations  control  the  holding  com- 
pany.^ Yet  in  practice  the  district  exchange  often  deter- 
mines the  disposition  of  the  greater  part  of  the  output  of 
its  component  units,  just  as  an  ordinary  holding  company 
would  do. 

The  district  exchange  is  authorized  to  retain  from  the 
proceeds  of  fruit  sales  a  brokerage  sufficient  to  pay  the  ex- 
penses of  its  operations.  Such  a  stipulation  involves  several 
implications.     It  suggests  that  the  district  exchange  makes 

1  Of  course  this  comparison  with  the  holding  company  is  merely  an 
analogy,  for  the  district  exchange  owns  no  stock  in  the  local  associa- 
tions. On  the  contrary,  the  local  associations  own  all  the  stock  of 
the  district  exchange. 


THE    GROWERS'    SELLING    AGENCY       119 

sales  and  receives  the  proceeds.  But  on  the  manner  of 
making  sales  and  on  the  extent  of  the  authority  of  the  dis- 
trict exchange  over  cars  owned  by  the  local  associations 
nothing  is  implied.  And  indeed  in  these  matters  the  great- 
est diversity  of  practice  exists.  Since  the  district  exchange 
is  a  creature  and  not  the  creator  it  can  have  no  power  be- 
yond that  which  is  delegated  by  each  local  association. 
Within  the  same  district  exchange,  moreover,  one  associa- 
tion may  delegate  more  power  than  another:  one  may 
merely  ask  for  advice  from  the  district  exchange  in  deter- 
mining for  itself  the  times  and  places  of  shipment;  another 
may  look  to  the  district  exchange  for  the  decision  of  these 
matters.  One  association  may  not  permit  the  consumma- 
tion of  any  sale  without  its  previous  consent;  another  may 
delegate  to  the  district  exchange  the  power  to  accept  or 
reject  offers  on  its  own  responsibility.  In  all  cases,  how- 
ever, sales  are  made  through  the  district  exchange :  that  is, 
sales  are  in  the  name  of  the  district  exchange,  for  the  ac- 
count of  the  local  association.  Therefore  all  proceeds  are 
forwarded  to  the  district  exchanges  for  distribution  to  the 
associations,  no  matter  what  degree  of  selling  authority 
the  associations  have  conferred  upon  the  exchange. 

The  brokerage  which  the  agreement  permits  the  district 
exchange  to  retain  is  not  a  percentage  of  the  selling  price 
of  the  fruit,  for  such  a  plan  would  make  some  associations 
pay  at  higher  rates  than  others.  Poor  fruit  always  costs 
as  much  to  sell  and  usually  more  than  good  fruit  does,  and 
it  would  be  manifestly  unfair  to  penalize  associations  with 
superior  products  by  retaining  the  same  percentage  of  their 
high  prices  as  was  retained  from  another  association's  low 
prices.  Instead,  the  total  expenses  of  the  district  exchange 
are  computed  and  divided  by  the  total  number  of  boxes 
sold  through  the  exchange  by  all  associations  to  find  a  com- 
mon fiat  rate  a  box,  which  is  then  retained  from  the  pro- 


I20  COOPERATIVE    MARKETING 

ceeds  for  the  account  of  each  association.  The  cost  of  the 
district  exchange  to  its  member  associations  averages  about 
one  cent  a  box. 

During  the  shipping  season  it  is  of  course  impossible  to 
estimate  what  the  exact  total  cost  of  the  exchange  is  going 
to  be  at  the  end  of  the  season.  But  the  district  exchange 
has  to  meet  its  obligations  as  they  arise,  so  a  flat  rate  a  box 
is  calculated  which  is  expected  to  approximate  as  closely 
as  possible  the  actual  rate,  which  can  only  become  evident 
at  the  end  of  the  year,  and  this  estimated  brokerage  is  re- 
tained from  all  shipments  during  the  season.  The  rate  is 
ordinarily  made  high  enough  unquestionably  to  cover  the 
exchange's  expenses,  and  at  the  conclusion  of  the  fruit 
year  any  surplus  above  actual  costs  is  distributed  among 
the  associations  on  the  basis  of  the  number  of  boxes  shipped. 
If  the  calculated  rate  of  brokerage  has  been  too  low,  each 
association  is  assessed  a  uniform  rate  according  to  the 
number  of  boxes  shipped  in  order  to  meet  the  deficit.  But 
such  assessment  is  almost  never  necessitated. 

There  are,  however,  very  different  costs  involved  in  sell- 
ing different  varieties  of  fruit  and  also  in  selling  by 
different  methods.  On  lemons,  for  example,  a  higher 
rate  is  assessed  than  on  oranges,  as  the  boxes  are  one-sixth 
heavier,  so  it  would  be  unjust  to  an  association  shipping 
oranges  only  if  a  uniform  rate  was  assessed  by  the  district 
exchange  against  all  the  fruit  handled,  this  total  including 
both  oranges  and  lemons.  Clearly,  too,  a  car  of  fruit  sold 
through  the  efforts  of  the  agents  of  the  California  Fruit 
Growers  Exchange  has  cost  more  for  selling  than  a  car 
merely  placed  upon  the  auction  market  or  a  car  that  with- 
out solicitation  on  anybody's  part  has  been  ordered  by  an 
Eastern  buyer  from  a  packing  association.  Consequently, 
a  different  rate  of  brokerage  is  retained  for  oranges  and 
for  lemons,  and  the  agreement  permits  a  different  rate  for 


THE    GROWERS'    SELLING    AGENCY       121 

auction  and  for  agent's  sales.  The  flat  rate  for  all  associa- 
tions, therefore,  is  intended  to  apply  only  to  the  same  kind 
of  fruit  sold  in  the  same  manner. 

The  agreement  makes  it  clear  that  in  the  handling  of 
fruit  the  district  exchange  acts  only  as  an  agent  and  not 
as  a  principal.  It  must  use  as  much  discretion  and  diligence 
as  possible  in  the  sale  of  fruit,  but  it  does  not  guarantee 
to  obtain  any  minimum  price  or  to  sell  the  fruit  at  all.  As 
the  district  exchange  has  practically  no  assets  an  associa- 
tion has  no  recourse  against  it  if  cars  are  damaged  in 
transit  or  if  they  fail  to  find  buyers  when  the  market  is 
reached.  All  this  might  look  as  though  the  district  ex- 
change is  merely  a  kind  of  commission  firm  to  which  the 
growers  through  their  packing  associations  consign  their 
fruit.  Indeed  it  might  even  seem  that  a  district  exchange 
is  a  particularly  malignant  exemplification  of  the  consign- 
ment plan,  for  each  member  association  is  by  the  agree- 
ment compelled  to  turn  over  all  fruit  to  the  district 
exchange  for  marketing  or  else  pay  damages  on  every  box 
not  so  delivered ;  and  the  district  exchange  is  guaranteed 
against  loss  by  the  provision  for  retaining  adequate  bro- 
kerage, while  a  commission  merchant  may  lose  money  if 
he  fails  to  receive  consignments. 

In  reality  the  points  of  similarity  are  quite  superficial. 
True,  the  district  exchange  can  force  the  associations  to 
turn  their  output  over  to  it.  True  also,  its  expenses  are 
guaranteed  by  the  brokerage  arrangement.  But  a  com- 
mission firm  does  business  for  profit,  and  in  order  to  secure 
profit  sometimes  resorts  to  the  most  reprehensible  knavery. 
It  may  sell  to  itself  or  to  a  dummy  for  a  low  price  so  as  to 
make  an  illegitimate  profit  on  the  resale.  It  may  juggle 
accounts  so  as  to  withhold  more  than  the  stipulated  com- 
mission. Both  of  these  things  took  place  before  the  de- 
velopment of  the  cooperative  distributive  system.     But  the 


122  COOPERATIVE    MARKETING 

district  exchange  is  not  attempting  to  make  profit  for  itself : 
by  its  very  organization  it  could  not  possibly  make  profit, 
for  it  is  only  allowed  to  retain  enough  from  sales  to  cover 
actual  expenses,  and  what  that  brokerage  shall  be  is 
periodically  determined  by  the  board  of  directors,  each  of 
whom  is  the  representative  of  an  association  from  whose 
fruit  the  brokerage  is  to  be  withheld.  Besides,  the  principal 
items  of  expense  of  the  district  exchange  are  salaries  and 
telegraph  charges,  which  cannot  easily  be  concealed  or 
manipulated.  This  statement  of  the  kinds  of  expense  which 
the  district  exchange  has  to  meet  precludes  the  possibility 
of  profits,  for  there  are  no  contingent  incomes,  the  stock 
of  the  exchange  is  only  nominal,  and  what  little  stock  there 
is  belongs  to  the  associations.  Neither  does  the  district 
exchange  have  the  slightest  inducement  toward  sharp  prac- 
tice. Nobody  connected  with  the  exchange  could  make 
anything  by  it,  and  any  attempt  would  be  like  trying  to 
cheat  yourself. 

The  commission  merchant's  profits  are  greater  the  higher 
the  price  he  obtains  for  his  client;  the  district  exchange 
retains  a  flat  rate  a  box  no  matter  what  the  price.  From 
this  angle  it  might  seem  that  the  district  exchange  has  little 
incentive  to  work  for  advantageous  sales.  The  commission 
merchant  will  lose  his  clientele  unless  returns  are  satisfac- 
tory, but  his  methods  of  procedure  cannot  be  affected  by 
the  desires  of  those  who  turn  their  products  over  to  him. 
In  short,  the  consignor  may  change  commission  firms,  but 
he  has  no  authority  over  the  firm  which  he  does  select. 
According  to  the  agreement,  associations  cannot  refuse  to 
sell  through  the  district  exchange,  at  least  during  any  fruit 
year,  but  if  the  manager  and  other  officers  of  the  exchange 
are  thought  to  be  inefficient  they  may  be  removed.  oMore- 
over,  the  sales  policy  and  procedure  of  the  exchange  are 
dictated  by  the  shippers  through  their  representatives,  and 


THE    GROWERS'    SELLING   AGENCY       123 

are  not  controlled  by  the  agent  as  in  the  case  of  a  com- 
mission merchant.  In  short,  associations  cannot  change 
selling  agents,  but  they  have  complete  authority  over  the 
selling  organization  because  they  in  fact  own  their  selling 
agency.  Hence,  a  district  exchange  manager  has  as  great 
an  incentive  for  efficient  service  as  has  the  manager  of 
a  manufacturing  corporation.  The  general  policy  is  deter- 
mined by  himself  and  his  board  of  directors,  then  both  his 
position  and  reputation  in  the  citrus  world  are  made  to 
depend  on  successful  execution  of  this  policy. 

As  in  the  agreement  between  growers  and  their  associa- 
tion, the  associations  agree  to  ship  all  their  fruit  through 
the  district  exchange  of  which  they  are  members  or  else 
pay  damages  on  each  box  not  so  shipped.  The  provision 
is  necessary  for  much  the  same  reasons.  After  an  exchange 
perfects  its  organization  to  handle  a  certain  quantity  of 
fruit  and  maps  out  a  campaign  for  distributing  that  quan- 
tity in  time  and  place,  it  would  patently  be  unfair  both  to 
the  district  exchange  and  to  the  other  associations  if  one 
or  two  disgruntled  associations  should  decide  arbitrarily 
to  withdraw.  Unsatisfactory  or  even  disastrous  prices  are 
an  inevitable  phenomenon  in  parts  of  each  fruit  season. 
The  district  exchange  is  in  no  way  to  blame  for  them,  and 
at  such  times  timorous  or  selfish  associations  must  be  re- 
minded, by  means  of  the  crop  agreement,  of  the  damage 
caused  by  their  failure  to  deliver  fruit.  Though  some  asso- 
ciations reserve  a  measure  of  control  over  sales  effected 
through  the  district  exchange,  no  association  is  at  liberty 
to  ship  through  other  channels  than  the  district  exchange 
unless  it  obtains  the  sanction  of  the  district  exchange. 

An  important  proviso  in  connection  with  the  damage 
stipulation  for  not  shipping  through  the  district  exchange 
is  contained  in  the  clause,  "which  through  any  fault  of 
their  own,  they  fail  to  deliver  to"  the  district  exchange. 


124  COOPERATIVE    MARKETING 

This  clause  has  reference  to  another  important  function 
performed  by  the  district  exchange.  The  exchange  repre- 
sents the  associations  before  the  railroads  and  orders  cars 
as  they  are  needed  by  the  association  manager.  In  former 
years,  a  shortage  of  refrigerator  cars  was  of  quite  frequent 
occurrence  at  certain  seasons,  and  it  was  sometimes  im- 
possible for  the  district  manager  to  secure  the  necessary 
cars.  If  in  some  manner  an  enterprising  association  man- 
ager located  a  few  cars  or  was  able  to  make  some  sales  to 
buyers  who  could  furnish  their  own  cars  it  was  felt  to  be 
unjust  to  forbid  him  to  sell  fruit  just  because  the  district 
exchange  was  unable  properly  to  perform  its  duties.  Re- 
cently little  difficulty  of  this  nature  has  arisen,  the  district 
manager  can  obtain  all  the  cars  he  desires,  and  the  proviso 
in  question  has  lost  much  of  its  significance. 

One  fundamental  point  of  difference  between  the  pro- 
cedure of  the  associations  and  that  of  the  district  exchange 
is  in  regard  to  pooling.  Within  an  association  the  fruit 
of  the  members  is  usually  pooled,  but  within  the  district 
exchange  the  fruit  of  the  member  associations  is  never 
pooled.  Each  association  receives  the  prices  which  its 
particular  cars  bring  without  any  reference  to  what  prices 
cars  of  other  associations  in  the  same  exchange  are  bring- 
ing. The  brands  of  the  associations  sell  on  their  own 
merits,  and  brands  from  two  different  associations  are  never 
shipped  in  the  same  car.  Again,  let  it  be  emphasized  that 
the  district  exchange  acts  only  as  an  agent,  that  it  owns 
no  fruit,  and  that  it  has  no  brands  of  its  own. 

Again  like  the  associations,  the  district  exchange  does 
not  attempt  to  retain  its  membership  by  compulsion.  At 
the  end  of  any  fruit  year  an  association  may  inform  the 
district  exchange  that  it  withdraws  from  its  obligations  to 
the  exchange.  While  a  member  association  can  thus  refuse 
to  avail  itself  of  the  facilities  of  the  district  exchange,  the 


THE    GROWERS'    SELLING    AGENCY       125 

exchange  could  not  possibly  refuse  to  market  fruit  from 
one  of  its  members,  for  the  exchange  is  the  property  of 
the  associations  and  must  act  according  to  their  pleasure. 
In  actual  practice,  just  as  a  group  of  growers,  members 
of  associations  or  otherwise,  may  decide  to  form  a  new 
packing  organization,  so  members  of  district  exchanges 
and  independent  concerns  may  decide  to  form  a  new  dis- 
trict exchange.  Or  a  member  of  an  exchange  has  the  power 
of  withdrawing  from  one  exchange  and  joining  another 
already  established,  provided  the  latter  is  willing  to  receive 
it.  Another  cause  for  withdrawal  might  arise  even  al- 
though an  association  was  not  at  all  dissatisfied  with  the 
policy  or  management  of  its  exchange.  With  the  extension 
of  the  producing  area  and  the  creation  of  new  packing 
associations  a  district  exchange  might  become  so  large 
that  division  into  two  exchanges  would  be  expedient.  For 
a  district  exchange  can  achieve  better  results  if  the  product 
it  is  called  upon  to  market  is  broadly  homogeneous. 

Probably  the  most  vital  question  in  connection  with  the 
district  exchange  system  and  the  one  discussed  most  fre- 
quently and  with  the  greatest  difference  of  opinion  is  the 
proper  scope  of  the  district  exchange's  power.  Before  en- 
tering upon  the  controversy,  however,  this  point  should 
be  clear :  the  district  exchange  has  absolutely  no  power 
except  what  is  granted  to  it  by  the  local  associations. 
Though  the  exchange  may  advise  the  associations  that  it 
would  be  to  their  advantage  if  the  authority  of  the  ex- 
change were  extended,  the  final  decision  as  to  granting  or 
withholding  the  power  rests  exclusively  with  the  several 
member  associations. 

Some  associations  believe  that  the  functions  of  the  dis- 
trict exchanges  should  be  quite  narrowly  restricted.  Indeed 
some  associations  do  not  believe  that  there  should  be  any 
district  exchanges  at  all.     But  as  long  as  they  do  exist  they 


126  COOPERATIVE    MARKETING 

are  to  be  tolerated,  though  not  allowed  to  take  more  than 
a  subordinate  part  in  the  work  of  distributing  the  citrus 
crop.  These  associations  recognize  the  convenience  of 
having  a  district  exchange  to  order  cars,  to  act  as  inter- 
mediary between  themselves  and  the  California  Fruit 
Growers  Exchange  and  to  be  a  kind  of  clearing  house  for 
general  marketing  information.  They  also  concede  that  it 
may  be  advisable  to  have  the  associations  of  a  given  district 
united  in  some  organization  a  little  less  formidable  than  the 
California  Fruit  Growers  Exchange.  They  call  a  halt, 
however,  when  it  comes  to  permitting  the  district  exchange 
to  have  an  important  voice  in  deciding  when  or  where  to 
ship  fruit,  or  to  determine  whether  to  accept  or  reject  bids 
on  the  market.  These  matters,  they  think,  constitute  the 
very  heart  of  the  association's  existence,  and  no  association 
should  entrust  its  life  to  other  hands  by  delegating  power 
over  shipments  and  prices. 

Such  a  philosophy  is  found  in  general  in  the  associations 
which  also  believe  in  wide  initiative  being  reserved  to  the 
members  as  to  the  times  and  amounts  of  picking.  The 
manager  and  board  of  directors  of  the  association  are  be- 
lieved to  have  a  more  vital  interest  in  the  advantageous 
sales  of  their  own  fruit  than  a  district  exchange  could  have, 
therefore  it  is  supposed  they  will  handle  the  marketing 
problem  more  successfully.  In  a  word,  such  associations 
believe  that  a  district  exchange,  which  owns  no  cars  of  fruit 
and  does  not  depend  for  its  income  on  securing  high  prices, 
will  not  give  all  the  cars  of  the  various  member  associa- 
tions that  careful  individual  attention  which  the  owners 
themselves  would  give  them ;  or,  if  you  want  your  property 
handled  properly  handle  it  yourself.  This  position  is  well 
represented  by  the  following  excerpt.  The  manager  of  a 
large  citrus  acreage  is  giving  his  reasons  for  entering  the 
exchange  system : 


THE    GROWERS'    SELLING    AGENCY       127 

I  assumed  that  a  man  who  went  into  the  Exchange  just 
packed  up  his  fruit  and  let  it  slide  and  the  Exchange  did 
the  rest.  Instead  I  found  that  each  shipper  in  the  Exchange 
has  absolute  control  of  his  own  shipments,  can  ship  when 
he  pleases,  can  reject  offers,  divert  cars  from  one  market 
to  another  without  dictation  from  any  one,  and  these  and 
other  rights  are  exercised  more  or  less  fully  according  to 
the  attitude  of  the  association  manager. 

In  fact,  the  greatest  attraction  to  me  and  one  of  the  sur- 
prising possibilities,  was  the  fact  that  by  the  very  nature 
of  things  local  management  of  each  association  has  almost 
everything  to  do  with  its  possible  success  or  failure. 

Under  the  new  arrangements  we  will  apply  all  the  con- 
fidential market  information;  it  will  be  focussed  on  the 
300  or  400  cars  shipped  by  us  from  Redlands,  and  scien- 
tific salesmanship  and  distribution  thereby  becomes  [sic] 
a  possibility." 

Other  associations,  on  the  contrary,  believe  that  the  dis- 
trict exchange  should  have  quite  ample  powers  and  then 
be  held  responsible  for  satisfactory  results.  They  take  the 
position  that  a  district  exchange  with  its  hands  tied  cannot 
be  expected  to  accomplish  any  startling  results.  The  im- 
portance of  careful  and  alert  salesmanship  is  by  no  means 
minimized,  but  they  think  satisfactory  marketing  can  more 
ccrtninly  be  achieved  by  building  up  a  strong  marketing 
agency  which  can  act  quickly  on  its  own  initiative  than  by 
making  the  district  exchange  refer  all  important  decisions 
to  the  associations  for  final  sanction.  In  essence,  these 
associations  take  the  position  that  packing  is  a  technical 
process  and  should  be  controlled  by  the  association  man- 
ager, but  that  marketing  is  a  business  problem,  that  it  re- 
quires a  different  kind  of  ability  to  obtain  the  best  results, 
and  that  the  association  should  meddle  very  little  in  market- 
ing operations. 

If  associations  confine  their  activities  chiefly  to  packing 

-Redlands  Review:    October  4,  1912. 


128  COOPERATIVE    MARKETING 

fruit  they  obviously  must  have  some  agency  in  touch  with 
market  conditions  to  advise  them  what  sizes  and  varieties 
to  ship,  when  and  in  what  amounts  to  ship,  and  where  to 
bill  the  cars.  For  this  advice  they  look  to  their  district 
exchange,  taking  the  view  that  they  can  get  these  services 
performed  and  secure  this  information  more  cheaply  and 
more  efficiently  through  the  district  exchange  than  by  at- 
tempting to  furnish  them  for  themselves.  Since  the  cost 
of  the  district  exchange  averages  slightly  less  than  one  cent 
a  box,  very  little  additional  marketing  efficiency  need  be 
contributed  to  more  than  recoup  this  expense.  But  slightly 
better  judgment  in  distribution  or  the  times  of  shipment 
may  add  lo  cents  to  the  price  of  each  box  sold,  and  the 
believers  in  the  district  exchange  system  are  convinced  that 
the  exchange  costs  immensely  less  than  it  adds  to  the  re- 
turns of  the  associations. 

A  brief  quotation  from  an  annual  report  of  one  of  the 
district  exchanges  which  stands  for  a  strong  policy  on  the 
part  of  the  exchange,  that  is,  for  a  large  delegation  of 
power  by  the  packing  associations,  may  throw  this  whole 
controversy  into  sharper  light: 

The  .  .  .  Fruit  Exchange  is  your  Selling  Agency  to 
which  you  look  for  advice  as  to  the  Time  and  Place  of 
shipment  and  whom  you  hold  responsible  for  your  financial 
returns. 

As  3^ou  do  this  you  should  give  them  correct  estimates  of 
your  crop,  deliver  the  fruit  in  good  condition,  well  graded, 
and  in  such  sizes  and  volume  and  at  such  times  as  they  de- 
sire it.  You  cannot  pick  undesirable  small  off-sizes  when 
there  is  no  demand  for  them,  nor  ask  them  to  market  your 
crop  at  a  time  when  conditions  are  unfavorable,  and  still 
hold  them  responsible  for  the  financial  returns. 

It  is  the  aim  and  duty  of  the  Management  to  sell  your 
crop  for  the  most  money  that  can  be  obtained  for  it.  To 
do  this  they  must  have  accurate  data  as  to  the  amount  of 
fruit  to  go  forward  and  have  it  properly  picked,  packed, 


THE    GROWERS'    SELLING    AGENCY       129 

and  shipped  according  to  market  conditions  as  they  develop. 
If  the  Associations  and  their  Members  choose  to  pick,  pack, 
and  market  the  crop  according  to  individual  judgment  they 
will  of  course  not  hold  the  Selling  Agency  responsible  for 
unsatisfactory  returns. 

The  full  operation  of  the  district  exchange  will  appear 
incidentally  with  the  description  of  the  central  exchange 
or  California  Fruit  Growers  Exchange.  Only  another  word 
is  necessary  at  this  juncture.  An  alert  district  exchange 
may  be  one  of  the  chief  causes  of  prosperity,  or  the  re- 
verse, for  a  whole  community.  If  considerable  authority 
is  delegated  to  it  by  the  associations,  the  growers  are  al- 
most entirely  dependent  on  the  district  manager's  astute- 
ness for  their  welfare.  This  being  the  case,  the  district 
manager  bears  a  heavy  responsibility.  Since  remunerative 
prices  depend  in  the  long  run  on  marketing  high  grade  and 
reliable  fruit  and  since  satisfactory  returns  to  growers  on 
their  investment  depend  on  producing  a  large  yield  to  the 
acre  of  this  desirable  fruit,  a  district  manager  has  not 
realized  his  highest  possibilities  if  he  restricts  himself  abso- 
lutely to  marketing  problems. 

Granted  that  one  of  the  important  functions  of  the  asso- 
ciation manager  is  to  try  to  help  his  growers  improve  their 
cultural  methods.  But  the  district  manager  has  a  wider 
outlook  than  has  the  local  manager,  consequently  he  should 
be  a  leader  in  progressiveness  for  his  entire  section  and 
transmit  helpful  information  both  as  to  growing,  picking 
and  packing  to  the  growers  through  the  association  man- 
agers and  as  far  as  possible  by  direct  contact  with  indi- 
vidual growers.  He  should  insist  that  all  fruit  sold 
through  his  exchange  come  up  to  certain  rigid  require- 
ments; he  should  train  his  associations  to  work  for  uni- 
formity of  product  so  that  a  regular,  thoroughly  satisfied 
clientele  can  be  built  up.     In  short,   the  district  manager 


130  COOPERATIVE    MARKETING 

occupies  a  delicate  and  difficult  position  and  must  be  a  man 
of  tact,  business  ability  and  impartiality.  The  local  asso- 
ciations through  their  representatives  should  offer  a  salary 
that  will  command  a  man  of  this  character,  then  they 
should  invest  him  with  a  wide  marketing  authority  and 
hold  him  strictly  accountable  for  satisfactory  results. 


CHAPTER  VIII 

THE  CENTRAL  EXCHANGE  OF  THE  COOPERATIVE 
ORGANIZATION 

The  third  and  in  many  respects  the  most  important  ele- 
ment of  the  California  cooperative  structure  is  the  central 
exchange  or  California  Fruit  Growers  Exchange.  This  is 
the  amalgam  which  holds  the  system  together  and  gives 
it  power  and  efficiency.  Growers  could  form  associations 
for  collective  packing  of  fruit;  several  associations  could 
even  sell  their  output  through  a  common  agency;  but  if 
they  stopped  there,  they  would  be  far  short  of  that  highly 
elaborated  marketing  machinery  which  the  citrus  growers 
have  established  in  the  California  Fruit  Growers  Exchange 
and  which  gives  the  citrus  industry  of  California  its  unique 
place  in  the  marketing  world.  The  central  exchange  is 
what  gives  coherence  to  the  efforts  toward  cooperation  on 
the  part  of  the  citrus  growers;  it  gives  direction  and 
strength  to  what  would  otherwise  be  an  inchoate,  inarticu- 
lated  mass  of  petty  cooperative  societies,  each  too  feeble  to 
develop  marketing  efficiency,  and  each  defeating  its  own 
aims  by  helping  defeat  the  purposes  of  similar  societies. 

In  191 6  the  California  Fruit  Growers  Exchange  re- 
incorporated as  a  non-profit,  non-capital  stock  organization 
as  permitted  under  the  California  law.  From  this  time 
forward,  therefore,  it  will  have  a  new  legal  form,  but  since 
its  business  operations  are  being  conducted  exactly  the  same 
as  before  the  change,  the  form  of  organization  under 
which  the  exchange  system  grew  to  its  present  proportions 
will  be  described. 

131 


132  COOPERATIVE    MARKETING 

In  organization,  the  central  exchange  down  to  191 6  much 
resembled  that  of  the  district  exchanges.  It  had  a  paid  up 
capital  of  only  $5,000  and  owned  no  property  aside  from 
office  fixtures  and  the  "Sunkist"  trademark.  It  was  op- 
erated at  cost  and  never  paid  any  dividends  on  stock.  Its 
stockholders  were  all  directors,  and  each  director  repre- 
sented some  district  exchange,  just  as  each  director  of  a 
district  exchange  represents  some  local  association.  The 
district  exchanges  designate  whomsoever  they  desire  as 
their  representatives  on  the  board  of  the  California  Fruit 
Growers  Exchange;  sometimes  they  choose  the  manager 
of  the  district  exchange,  sometimes  one  of  the  directors. 
The  stock  of  the  central  exchange  was  owned  by  the  dis- 
trict exchanges  and  appeared  in  the  name  of  the  men  the 
district  exchanges  chose  as  their  representatives  on  the 
directorate  of  the  California  Fruit  Growers  Exchange. 
These  directors  of  the  central  exchange  organize  their 
board  and  elect  a  general  manager.  To  this  general  man- 
ager is  entrusted  the  duty  of  establishing  and  supervising 
an  efficient  marketing  mechanism.  He  it  is  more  than  any 
other  one  man  who  sets  the  pace  for  the  citrus  industry, 
whose  policies  make  or  mar  the  growers'  fortunes. 

It  is  evident,  therefore,  that  the  organization  of  the  ex- 
change system  as  a  whole  is  a  series  of  organizations,  each 
kind  of  organization  performing  separate  functions.  The 
citrus  growers  unite  themselves  in  packing  associations; 
the  packing  associations  organize  and  own  selling  agencies 
or  district  exchanges;  the  district  exchanges  organize  and 
own  the  central  exchange  or  California  Fruit  Growers 
Exchange,  which  furnishes  the  facilities  through  which  the 
district  exchanges  operate  for  the  local  associations  in  be- 
half of  the  growers.  As  a  whole,  the  exchange  system  is 
strictly  democratic.  The  individual  growers  elect  the  board 
of  directors  of  the  local  association,  this  board  elects  its 


THE  CENTRAL  EXCHANGE      133 

director  in  the  district  exchange,  and  the  board  of  the  dis- 
trict exchange  chooses  its  director  in  the  central  exchange. 
Hence,  any  question  of  poHcy  throughout  the  entire  system 
is  ultimately  decided  by  the  growers  themselves. 

Suppose  that  the  board  of  directors  of  the  central  ex- 
change should  adopt  a  policy  that  failed  to  command  the 
support  of  a  majority  of  the  growers.  At  the  annual  meet- 
ing of  the  local  association  in  the  fall  some  one  would  offer 
a  resolution  to  the  effect  that  the  association  was  not  in 
sympathy  with  this  action  on  the  part  of  the  California 
Fruit  Growers  Exchange  and  that  the  representative  of 
the  association  on  the  district  exchange  be  instructed  to 
use  his  influence  against  the  policy.  If  a  majority  of  the 
associations  composing  a  district  exchange  so  voted  a  ma- 
jority of  the  directors  of  the  district  exchange  would  be 
pledged  against  the  unpopular  measure,  therefore  they 
would  instruct  their  delegate  to  the  central  exchange  to 
oppose  it.  Finally,  if  most  of  the  district  exchanges  should 
prove  hostile  there  would  be  no  recourse  on  the  part  of 
the  directors  of  the  central  exchange  except  to  reverse  their 
former  judgment  and  abandon  the  policy  in  question. 

The  original  judgment  of  the  directors  of  the  central 
exchange  might  conceivably  be  for  the  best  interests  of  the 
growers,  but  the  important  point  is  that  by  the  very  nature 
of  the  exchange  system  the  growers  themselves  must  be 
the  arbiters  of  what  is  for  their  interest.  Nothing  can  be 
foisted  on  them  either  by  the  district  or  central  exchange, 
for  these  latter  organizations  are  owned  and  controlled  by 
the  growers :  they  are  the  servants  of  the  local  associations. 
li  the  growers  see  fit  to  employ  local,  district,  and  general 
managers  who  are  expected  to  offer  suggestions  and  make 
improvements,  well  and  good,  but  that  does  not  mean  that 
these  officers  can  proceed  in  contravention  of  the  wishes 
of  a  majority  of  growers. 


134  COOPERATIVE    MARKETING 

At  present  the  exchange  system  is  composed  as  follows : 
Some  8,000  growers  are  united  into  117  local  packing  ex- 
changes ;  these  are  grouped  into  seventeen  district  selling 
exchanges;  the  seventeen  district  exchanges  are  integrated 
in  the  California  Fruit  Growers  Exchange.  It  follows  that 
the  average  association  is  composed  of  about  sixty-five 
growers  and  that  six  or  seven  associations  form  the  average 
district  exchange.  There  are,  also,  in  the  exchange  system, 
fourteen  special  contract  shippers.  These  shippers  are 
merely  packing  associations  which  have  no  convenient  ac- 
cess to  any  district  exchange,  and  they  have  no  voice  in 
the  management  of  the  central  exchange.  The  only  way 
these  shippers  could  affect  the  exchange  policy  would  be 
by  withdrawal.  On  the  other  hand,  each  district  exchange 
can  affect  the  policy  of  the  California  Fruit  Growers  Ex- 
change in  proportion  to  the  quantity  of  fruit  that  it  sells 
through  the  Exchange.  That  is,  a  director  on  the  central 
exchange  who  represented  a  district  exchange  which  fur- 
nished 10  per  cent,  of  the  total  Exchange  shipments  would 
not  have  voting  power  of  one-seventeenth  but  of  one-tenth 
of  the  total  voting  power. 

What  functions  the  California  Fruit  Growers  Exchange 
was  created  to  perform  and  the  methods  it  is  expected  to 
employ  will  best  appear  from  quotations  from  the  contract 
between  the  central  exchange  and  the  seventeen  component 
district  exchanges : 

It  has  been  deemed  necessary  by  the  parties  of  the  second 
part  [the  district  exchanges]  to  associate  themselves  to- 
gether, and  cooperate  in  the  matter  of  developing  the  citrus 
industry  and  marketing  its  products  for  the  following  named 
Principal  Purposes  and  Objects. 

To  lessen  the  cost  of  marketing  by  creating  Agencies  who 
will  act  for  each  member. 

To  insure  the  collection  of  sales. 

To  facilitate  the  collection  of  damage  claims. 


THE  CENTRAL  EXCHANGE      135 

To  encourage  the  improvement  of  the  product  and  the 
package. 

To  increase  the  consumption  of  citrus  fruit  by  develop- 
ing new  markets  and  to  aid  in  supplying  all  the  people  with 
good  fruit  at  a  reasonable  price. 

To  secure  a  fair  and  just  government  of  all  bodies  af- 
filiated with  these  parties,  democratic  in  principle  and 
through  which  at  all  times  all  policies  shall  be  controlled  by 
the  majority  will  of  the  shippers  connected  therewith  in  just 
proportion  to  shipments  made.  That  the  business  engaged 
in,  being  interstate  in  character,  to  secure  at  all  times  full 
compliance  with  the  laws  of  the  United  States  concerning 
Interstate  Commerce,  and  to  that  end  prevent  any  organiza- 
tioiT  connected  therewith  from  having  any  power  or  author- 
ity in  contravention  of  the  laws  of  the  United  States  con- 
cerning such  business.  The  general  plan  being  to  unite  in 
securing  those  results  which  are  beneficial  to  all  alike,  but 
at  the  same  time  preserving  to  each  shipper  complete  inde- 
pendence of  action  as  to  all  of  his  shipments.  .  .  . 

The  party  of  the  first  part  [the  California  Fruit  Growers 
Exchange]  shall  be  considered  the  general  agent  of  all  the 
parties  of  the  second  part  in  all  matters  concerning  the 
marketing  of  citrus  fruit,  and  such  other  matters  as  are 
incident  thereto  within  the  limitations  hereinafter  provided, 
with  power  to  provide  a  suitable  place  for  doing  business. 

To  elect  or  appoint  a  suitable  official  force  to  supervise 
the  business,  at  such  salaries  as  may  from  time  to  time 
be  considered  proper  by  the  directors  of  the  party  of  the 
first  part. 

To  employ  a  force  of  sales  agents  stationed  at  various 
points  throughout  the  United  States,  Canada,  and  such 
other  countries  as  may  be  decided  upon  as  will  be  sufficient 
to  dispose  of  the  products  of  the  second  parties  in  all  avail- 
able territories. 

To  organize  and  maintain  a  claim  department  for  the 
handling  of  all  claims. 

To  maintain  a  legal  department  to  take  care  of  the  neces- 
sary litigation,  and  furnish  advice  to  the  various  organiza- 
tions connected  herewith. 

To  maintain  an  advertising  bureau  for  the  purpose  of 
stimulating  consumption  and  demand. 


136  COOPERATIVE    MARKETING 

To  create  any  other  department,  or  incur  any  other  ex- 
pense which  may  be  deemed  necessary  by  the  board  of 
directors  of  the  party  of  the  first  part  to  protect  all  those 
interests  of  the  parties  of  the  second  part  of  a  general  na- 
ture, and  which  will  affect  all  alike,  within  the  scope  of  the 
duties  of  the  first  party  as  herein  provided. 

It  is  agreed  that  all  the  information  obtained  by  the  party 
of  the  first  part;  all  of  the  facilities  established  by  it;  all  of 
the  books  or  records  maintained  by  it;  all  of  the  Agencies, 
both  general  and  local,  shall  always  be  at  all  times  available 
to  the  second  parties,  or  their  accredited  representatives. 

The  second  parties  will  at  all  times  cooperate  for  what- 
ever object  may,  within  the  law,  be  deemed  to  be  for  the 
general  good.  They  will  each  and  all  abide  by  and  be  bound 
by  all  the  contracts,  agreements  and  sales  made  by  the  party 
of  the  first  part  for  any  member  of  such  organization,  and 
will  promptly  ratify  any  action  taken  by  the  party  of  the 
first  part,  or  any  of  its  authorized  agencies  in  behalf  of  any 
or  all  of  the  parties  of  the  second  part  within  the  scope  of 
the  authority  of  such  agencies. 

This  agreement  shall  continue  in  force  and  effect  until  the 
first  day  of  September,  1920,  and  during  that  period  the 
parties  of  the  second  part  and  all  associations,  corporations, 
partnerships  or  individuals  connected  with  such  second 
parties,  or  shipping  through  such  second  parties,  or  any 
of  them,  will  ship  all  their  citrus  fruits  through  the  parties 
of  the  first  part  and  the  marketing  agencies  by  it  estab- 
lished, and  for  such  period  of  time  will  consign  all  ship- 
ments to  the  party  of  the  first  part  at  some  point  where  the 
said  party  of  the  first  part  has  representation,  through  and 
by  the  local  exchange  with  which  each  association  is  af- 
filiated. Provided,  however,  that  any  party  to  this  agree- 
ment may  withdraw  therefrom  on  the  first  day  of  Septem- 
ber of  any  year,  and  be  no  longer  bound  by  the  stipulations 
herein  agreed  upon,  by  filing  a  written  notice  of  withdrawal 
with  the  party  of  the  first  part,  ten  days  or  more  before  any 
such  date,  and  said  second  party  agrees  that  if  it  shall  at  any 
time  during  the  life  of  this  agreement  fail  to  ship  all  its 
citrus  fruit  as  hereinbefore  agreed  upon,  or  shall  dispose 
of  all  or  any  of  it  elsewhere,  or  otherwise  than  as  herein 


THE  CENTRAL  EXCHANGE      137 

agreed  upon,  that  it  will  forfeit  and  pay  as  liquidated  dam- 
ages to  the  party  of  the  first  part,  an  amount  equal  to 
twenty-five  cents  a  box  on  all  such  citrus  fruits  which  are, 
or  may  be  shipped  or  sold  otherwise  than  as  stipulated  in 
this  contract,  providing  the  first  party  was  ready  and  will- 
ing to  receive  and  handle  such  fruit. 

Reserved  Rights  of  Shippers 
It  is  understood,  however,  that  each  shipper  reserves  to 
itself  the  right  to  regulate  and  control  its  own  shipments, 
to  use  its  own  judgment,  and  decide  for  itself  when  and  in 
what  amounts  it  shall  ship ;  to  what  markets  it  shall  ship ; 
and  except  at  auction  points,  the  price  it  is  willing  to  re- 
ceive. Fully  reserving  the  right  of  free  competition  with 
all  other  shippers,  including  other  members  of  this  organiza- 
tion unhampered  and  uncontrolled  by  any  one. 

First:  All  fruit,  however  sold,  shall  be  assessed  alike  per 
box  in  proportion  to  the  Carriers'  estimated  weight  to  pay 
salaries  and  expenses  of  the  General  Manager,  General 
Eastern  Agent,  and  their  assistants  and  all  employees,  rents 
and  expenses  of  the  Los  Angeles  Office  of  the  party  of  the 
first  part,  including  all  telegrams  and  general  items  of  ex- 
pense, such  as  printing,  supplies,  inspection  of  fruit,  etc. ; 
also  to  pay  the  expense  of  establishing  a  Claim  Department 
for  the  purpose  of  making  and  collecting  claims  against 
Railroad  Companies  and  other  corporations  and  individuals 
.  .  .^also  to  pay  all  necessary  legal  expenses,  including  sal- 
aries of  one  or  more  attorneys  for  necessary  legal  advice 
and  all  legal  expenses  necessary  to  prosecute  claims  and 
suits  in  courts,  both  Federal  and  State,  and  before  the  Inter- 
state Commerce  Commission;  also  to  pay  all  expenses  of 
proper  and  judicious  advertising  .  .  .  also  to  pay  all  proper 
expenses  of  extending  the  sale  of  said  fruit  in  foreign  coun- 
tries, and  all  other  necessary  and  proper  expense  that  may 
be  incurred  in  protecting  and  furthering  the  interests  of  the 
said  parties  of  the  second  part,  excepting  that  fruit  sold  by 
the  local  exchanges  at  their  expense  and  risk,  cither  at  auc- 
tion or  private  sale,  at  such  points  as  the  board  of  directors 
may  from  time  to  time  determine  shall  be  excluded  from 
these  charges  and  assessed  an  arbitrary  charge  to  be  fixed 
by  the  board  of  directors  of  the  party  of  the  first  part. 


138  COOPERATIVE    MARKETING 

Second:  All  fruit  sold,  at  auction  or  on  commission,  ex- 
cept as  hereinbefore  provided,  shall,  in  addition  to  expense 
named  in  first  paragraph,  be  assessed  alike  per  box  in  pro- 
portion to  Carriers'  estimated  weight,  to  pay  the  salaries 
and  expenses  of  Agents,  Inspectors,  and  other  expenses  as 
may  accrue  in  auction  agencies. 

All  auction  and  commission  charges  shall  be  borne  by 
the  respective  shipments  and  deducted  from  the  proceeds 
of  sale  of  each  car  or  shipment. 

Third:  All  fruit  sold  otherwise  than  herein  provided 
shall,  in  addition  to  expense  named  in  first  paragraph,  be 
assessed  alike  per  box  in  proportion  to  Carriers'  estimated 
weight,  to  pay  all  expenses  connected  with  the  marketing 
of  the  same  not  provided  for  in  subdivision  No.  i  of  this 
article,  including  all  salaries,  brokerages,  office  and  inci- 
dental expenses  of  the  various  agents  (not  including  auction 
agency  expenses). 

The  said  party  of  the  first  part  shall  make  a  statement 
within  thirty  days  after  the  first  day  of  September  of  each 
year,  and  a  readjustment  of  such  statement  once  a  month, 
covering  all  shipments  for  that  season,  made  up  to  the  time 
of  the  statement  or  readjustment,  and  levy  an  assessment 
on  the  parties  of  the  second  part  according  to  the  number 
of  boxes  shipped.  Such  assessment  shall  be  due  within 
three  days  from  date  on  which  it  is  made.  In  the  event  of 
failure  to  pay  any  such  assessment  within  ten  days  from 
its  date  the  party  of  the  first  part  may  refuse  to  handle  any 
fruit  for  the  delinquent  party  until  all  assessments  past  due 
have  been  paid. 

Agents  shall  be  selected  and  employed  by  the  party  of 
the  first  part,  on  salaries  or  brokerage,  and  each  shall  be  re- 
quired to  furnish  a  satisfactory  bond  in  some  responsible 
guarantee  company  for  the  faithful  performance  of  his 
duties. 

The  party  of  the  first  part  shall  require  its  agents  to  keep 
it  fully  informed  as  to  the  condition  of  the  market,  the  ar- 
rival and  condition  of  the  fruit,  the  wholesale  and  retail 
prices  of  fruit  in  their  respective  districts,  and  furnish  such 
other  information  as  may  be  required  of  them,  and  such  in- 
formation shall  be  immediately  transmitted  by  said  party  of 
the  first  part  to  all  the  parties  of  the  second  part. 


THE    CENTRAL   EXCHANGE  139 

No  schedule  of  prices  or  quotation  shall  be  issued  or  be 
distributed  by  any  of  the  parties  of  the  second  part,  except 
through  the  party  of  the  first  part. 

None  of  the  parties  of  the  second  part  shall  employ  any 
traveling  man,  agent,  or  solicitor  for  the  sale  of  its  fruit. 

Copies  of  all  correspondence  or  other  matters  in  any  man- 
ner affecting  the  interests  of  the  parties  of  the  second  part 
shall  be  promptly  forwarded  by  the  respective  agents  to  the 
parties  of  the  second  part  whose  interests  are  involved. 

The  party  of  the  first  part  shall  cause  the  fruit  furnished 
by  said  several  parties  of  the  second  part  to  be  sold  for  the 
account  of  the  party  of  the  second  part  furnishing  the  fruit, 
and  full  report  and  account  sales  shall  be  promptly  rendered 
therefor,  and  payment  of  money  made  direct  to  the  party 
of  the  second  part  shipping  such  fruit,  and  a  copy  of  the  ac- 
count sales  shall  be  rendered  to  the  party  of  the  first  part. 

Each  of  the  parties  of  the  second  part  shall  furnish  to 
the  Secretary  of  the  party  of  the  first  part  an  estimate  of 
the  number  of  cars  of  each  variety  of  fruit  controlled  by 
said  second  party  as  often  as  called  for  by  the  Board  of 
Directors  of  said  first  party. 

That  whenever  in  this  contract  the  word  "car"  occurs, 
as  relating  to  a  carload  of  fruit,  it  shall  be  considered  as 
containing  the  minimum  fixed  by  the  Carriers. 

The  party  of  the  first  part  agrees  to  use  its  best  efforts 
to  sell,  market,  and  dispose  of  the  fruit  belonging  to  said 
parties  of  the  second  part  as  aforesaid,  but  it  is  expressly 
agreed  between  the  parties  hereto  that  the  said  party  of  the 
first  part  in  the  sale  and  disposal  of  said  fruits  acts  only  as 
Agent  of  the  said  parties  of  the  second  part  and  shall  not 
be  held  liable  for  any  loss  that  may  result  in  disposing  of 
such  fruit,  except  as  herein  provided. 

The  only  losses  assumed  by  the  party  of  the  first  part  are 
those  arising  from  financial  failures  or  default  of  purchasers 
after  having  positively  accepted  the  fruit,  and  which  default 
is  not  due  to  complaint  of  the  buyer  of  the  quality,  condition 
or  grade  of  the  shipment,  and  these  losses  shall  be  assessed 
to  the  parties  of  the  second  part  on  a  percentage  based  upon 
the  gross  f.  o.  b.  returns  for  the  year. 

The  party  of  the  first  part  shall  maintain  a  claim  depart- 


140  COOPERATIVE    MARKETING 

ment  for  the  collection  of  all  claims  against  railroads  and 
transportation  companies,  and  at  the  request  of  any  of  the 
parties  of  the  second  part,  the  party  of  the  first  part  shall 
to  the  best  of  its  ability,  collect  and  prosecute  on  behalf  of 
the  party  in  interest  any  claim  for  overcharge  or  loss  and 
damage  not  herein  provided  for,  and  also,  upon  the  ap- 
proval of  its  Board  of  Directors,  bring  suit  and  prosecute 
the  same  in  the  courts,  all  at  the  expense  of  the  party  of 
the  first  part. 

All  matters  of  business  involving  the  interests  of  the 
parties  hereto  not  herein  specified,  shall  be  determined  by 
the  said  party  of  the  first  part,  or  by  a  meeting  of  repre- 
sentatives from  said  parties  of  the  second  part,  as  herein- 
after provided. 

[The  next  following  section  provides  for  a  board  of  rep- 
resentatives, one  to  be  chosen  by  each  district  exchange. 
The  board  has  supervision  over  the  manner  in  which  this 
contract  is  carried  out,  and  a  vote  of  the  representatives  is 
equivalent  to  instructions  to  the  board  of  directors  of  the 
California  Fruit  Growers  Exchange.  If  demanded,  voting 
power  on  the  board  of  representatives  is  according  to  ship- 
ments of  the  district  exchanges.] 

Turning  to  the  machinery  which  the  central  exchange 
has  established  for  the  performance  of  its  duties  as  general 
agent  of  the  district  exchanges,  we  find  as  the  most  tangible 
feature  a  well  equipped  general  office  in  Los  Angeles,  or- 
ganized into  various  departments.  In  outward  appearance 
the  Exchange  does  not  differ  markedly  from  any  modern 
business  office,  but  its  methods  and  its  sources  of  authority 
are  fundamentally  unlike  those  which  exist  in  an  ordinary 
mercantile  corporation. 

On  each  Wednesday  morning  the  board  of  directors  of 
the  California  Fruit  Growers  Exchange  holds  its  regular 
meeting.  The  seventeen  directors  are  the  only  stockholders 
of  the  exchange,  so  a  meeting  of  the  board  amounts  to  a 
general  meeting  of  the  corporation.  From  the  practice  of 
holding  weekly  meetings  it  is  evident  that  this  board  of 


THE  CENTRAL  EXCHANGE      141 

directors  is  not  a  figurehead.  Since  each  director  repre- 
sents a  district  exchange  and  since  the  district  exchanges 
are  scattered  over  the  entire  citrus  producing  area  of  any 
consequence,  it  follows  that  these  weekly  meetings  of  the 
Exchange  are  in  reality  a  clearing  house  for  the  ideas,  de- 
sires and  accomplishments  of  the  whole  California  citrus 
industry.  At  these  meetings  it  is  possible  to  feel  the  piil^e 
of  the  growers  themselves,  for  even  a  local  issue  of  any 
real  significance  is  certain  to  pass  through  the  association 
directorate  to  the  district  exchange  and  thence  be  trans- 
mitted to  the  central  exchange,  from  which  in  turn  it  per- 
meates through  all  of  the  associations. 

A  meeting  of  the  board  of  directors  of  a  great  business 
corporation  is  not  usually  thought  of  as  having  much  re- 
semblance to  a  peoples'  forum,  but  the  weekly  meetings  of 
the  Exchange  directors  are  open  to  any  member  who  cares 
to  attend.  Of  course  only  the  directors  can  vote,  but  any 
exchange  member  who  has  an  interest  in  that  particular 
meeting  or  has  a  general  interest  in  the  citrus  industry 
may  be  present  and  take  part  in  the  discussions.  Conse- 
quently, instead  of  consisting  of  a  group  of  seventeen 
directors,  the  meeting  is  a  gathering  of  100  to  175  who 
are  on  hand  to  hear  what  is  going  on  in  the  citrus  world. 
There  will  be  found  among  this  number  managers  of  the 
district  exchanges  and  local  associations,  directors  of  these 
bodies,  and  individual  growers;  in  fact,  anybody  who  is 
seeking  information  on  things  citrus.  For  the  purpose  of 
encouraging  a  large  attendance  of  citrus  men  at  these  meet- 
ings they  are  held  in  a  large  room  at  the  Exchange  offices 
whose  generous  dimensions  suggest  a  small  auditorium 
rather  than  a  committee  room. 

In  a  study  of  this  kind  there  is  no  need  of  arguing  upon 
the  wisdom  of  the  Exchange  in  adopting  this  policy  of  full 
publicity  and  genuine  democracy.     These  weekly  meetings 


142  COOPERATIVE    MARKETING 

of  the  California  Fruit  Growers  Exchange  may  be  named 
as  the  chief  cause  of  the  outstanding  progressiveness  of 
the  citrus  growers  in  comparison  with  other  farmers.  All 
of  the  business  and  technical  problems  of  the  industry  come 
up  for  discussion  and  decision.  Local  viewpoints  perforce 
give  way  to  attention  to  the  good  of  all  concerned.  Each 
grower  or  manager  gets  the  wisdom  of  the  group  to  apply 
on  his  own  problems.  More  important  still,  he  sees  that 
his  problems  are  not  peculiar  to  himself  and  that  they  can 
best  be  solved  by  intelligent  cooperation  with  others  who 
are  working  on  the  same  difficulties.  Then  improvements 
are  immediately  carried  back  to  the  producing  districts 
and  can  be  in  general  operation  before  the  information  that 
anything  new  has  been  worked  out  could  have  penetrated 
to  the  farmers  of  an  unorganized  industry. 

Under  such  auspices,  where  the  men  from  different  sec- 
tions are  meeting  so  frequently,  petty  misunderstandings 
and  local  jealousies  do  not  flourish.  These  men  discuss 
their  achievements,  and  it  soon  becomes  apparent  to  a  man- 
ager or  a  grower  that  there  are  others  besides  himself  who 
know  something  about  the  citrus  business.  He  even  loses 
his  belief  that  his  is  at  least  one  grove  or  packing  house 
in  which  things  are  done  so  well  that  improvement  is  im- 
possible. At  such  gatherings  comparisons  of  results  ac- 
complished by  the  various  associations  are  in  order,  and 
a  manager  soon  discovers  the  fact  if  his  house  does  not 
compare  favorably  with  the  others  in  efficiency.  He  there- 
fore has  the  strongest  incentive  toward  improvement,  for 
his  growers  are  not  likely  to  look  on  with  equanimity  if 
the  manager's  performance  is  not  up  to  par.  Without  these 
meetings  the  growers  of  an  inefficient  association  would  be 
very  slow  in  realizing  that  their  packing  house  methods 
needed  overhauling,  and  the  manager  would  not  have  the 
information  that  would  make  rejuvenation  possible. 


THE  CENTRAL  EXCHANGE      143 

Selfishness  on  the  part  of  certain  associations  or  indi- 
viduals is  another  thing  that  receives  scant  shrift  at  these 
meetings.  No  grower  or  manager  could  attend  many  of 
the  sessions  of  the  Exchange  and  hear  the  necessity  of 
comprehensiveness  in  marketing,  both  as  to  time  and  place, 
constantly  emphasized  and  then  return  to  his  locality  and 
feel  justified  in  looking  solely  to  his  own  advantage  with 
no  thought  for  the  welfare  of  the  industry  as  a  whole.  As 
the  condition  of  the  fruit  market  and  other  markets  and 
the  general  business  situation  all  over  this  country  and 
Canada  are  discussed  from  week  to  week  it  is  brought  home 
that  the  citrus  industry  is  not  a  solitary  entity  but  a  part 
of  a  complicated  economic  situation  and  that  business  suc- 
cess can  be  obtained  only  by  making  the  proper  adjustments 
to  this  situation.  It  comes  as  a  sobering  thought  to  many 
a  grower  that  he  cannot  honorably  try  to  select  the  crest 
of  the  fruit  season  for  all  his  own  shipments,  because  if 
everyone  adopted  a  similar  policy  the  industry  as  a  whole 
could  not  hope  to  prosper.  Regular  distribution  on  a  mer- 
chandizing basis  with  the  willingness  to  bear  a  part  of  the 
burden  as  the  only  legitimate  claim  to  a  share  of  the  re- 
ward is  a  principle  that  finally  becomes  part  of  the  creed 
of  the  association  manager.  Hence,  when  he  hears  at  the 
board  meeting  that  the  general  market  conditions  demand 
that  a  certain  percentage  of  the  crop  be  sent  forward  each 
month  if  the  season  as  a  whole  is  to  be  a  success,  and  he 
knows  that  his  own  house  has  refused  to  assume  its  just 
proportion  of  the  responsibility,  his  complacency  is  likely 
to  be  perturbed.  He  goes  back  to  his  board  of  directors 
and  says  that  in  his  judgment  the  time  is  ripe  for  increasing 
the  shipments  of  the  association. 

Nor  can  too  much  emphasis  be  laid  on  the  advantage 
that  a  large  body  of  men  interested  in  the  same  problems 
derives  from  such  conferences  toward  solving  these  prob- 


144  COOPERATIVE    MARKETING 

lems.  They  are  put  in  touch  with  the  latest  developments 
in  citrus  culture  or  packing.  The  work  of  the  State  Uni- 
versity, the  various  Federal  bureaus,  and  of  individuals  is 
presented,  and  helpful  discoveries  are  put  to  immediate 
and  extensive  use.  While  valuable  policies  are  thus  worked 
out  through  these  open  meetings,  ill  considered  policies  are 
much  more  certain  to  be  detected  by  lOO  minds  than  they 
would  be  by  those  of  the  seventeen  directors  only.  Mem- 
bers have  ready  access  to  the  officers  of  the  California 
Fruit  Growers  Exchange  or  at  least  to  their  own  district 
representative  and  have  every  facility  for  urging  their  criti- 
cisms or  constructive  propositions. 

The  weekly  meeting  of  the  Exchange  proceeds  some- 
what as  follows :  the  general  manager  gives  a  review  of 
the  week's  business,  touching  upon  matters  both  within 
and  without  the  system  that  have  a  bearing  on  marketing 
or  citrus  problems  in  general.  He  then  outlines  certain 
questions  that  should  come  before  the  directors  for  dis- 
cussion or  decision.  Thereupon  the  board  takes  up  with 
the  manager  any  phase  of  the  business,  asking  him  about 
conditions,  gaining  further  information  about  his  sug- 
gestions, or  propounding  new  propositions  to  him.  Busi- 
ness is  handled  with  such  despatch  and  comprehensiveness 
of  viewpoint  that  little  doubt  is  left  in  the  mind  of  the 
observer  that  here  at  all  events  is  a  group  of  cooperators 
where  business  efficiency  is  not  sacrificed.  Then  come  re- 
ports from  the  heads  of  the  orange  sales  department,  lemon 
sales  department,  legal  department,  field  department,  or 
other  departments  which  have  pertinent  information  to 
offer  or  plans  to  suggest.  These  various  reports  and  sug- 
gestions are  acted  upon  as  presented,  and  at  the  conclusion 
of  the  meeting  the  directors  and  all  in  attendance  have  a 
definite  conception  of  what  has  recently  happened  in  the 
citrus  world  and  what  the  prospects  are  for  the  near  future. 


THE  CENTRAL  EXCHANGE      145 

When  these  men  go  home  to  their  district  exchanges  and 
associations  they  cannot  help  but  mold  local  policies  along 
broad  lines,  while  without  these  frequent  conferences  local 
issues  might  easily  obscure  that  intelligent  and  comprehen- 
sive procedure  in  marketing  problems  for  which  the  ex- 
change system  is  noted. 

Since  the  central  exchange,  like  the  associations  and 
district  exchanges,  has  a  provision  that  any  member  can 
withdraw  at  the  end  of  any  year  it  appears  that  the  ex- 
change system  depends  for  success  on  ability  to  satisfy  its 
8,000  members  and  not  on  coercion.  An  individual  mem- 
ber, an  association,  or  a  district  exchange  uses  its  own 
judgment  about  whether  it  will  remain  a  part  of  the  co- 
operative structure  or  withdraw  from  it.  There  are  no 
penalties  or  losses  or  formalities  involved  in  severing  mem- 
bership, and  one  may  be  quite  certain  that  the  people  who 
are  in  the  exchange  are  there  because  they  believe  that  it 
can  serve  their  requirements  better  than  any  of  the  ordinary 
markting  agencies  that  are  available  to  farmers.  This  free- 
dom from  coercion  does  not  result,  however,  in  an  unstable 
organization.  Within  the  local  associations  there  is  some 
slight  instability  of  membership,  a  member  leaving  now 
and  then  and  an  outside  grower  joining  occasionally.  The 
defections  do  not  quite  balance  the  accessions,  so  the  asso- 
ciations are  gradually  gaining  in  power  and  prestige  and 
need  not  worry  over  a  few  trifling  losses.  Though  having 
full  pow'er  to  do  so,  an  association  very  seldom  withdraws 
from  the  exchange  system,  and  no  district  exchange  has 
ever  severed  its  relation  in  order  to  leave  the  system.  Hence 
the  exchange  as  a  whole  has  a  constant  and  permanent 
business,  although  the  personnel  of  the  constituent  growers 
is  constantly  being  slowly  altered. 

There  are  still  other  provisions  of  the  contract  which 
demand  discussion,  but  some  repetition  can  be  saved  by 


146  COOPERATIVE    MARKETING 

considering  them  in  the  following  chapter  in  connection 
with  the  achievements  of  the  exchange  system.  Coopera- 
tion in  the  citrus  industry  in  California,  then,  arose  out  of 
the  failure  of  buyers  and  commission  men  to  market  a 
constantly  increasing  output.  The  principles  underlying 
the  whole  organization  are  the  distribution  of  risk  and  the 
development  of  a  marketing  mechanism  that  could  transfer 
citrus  fruits  from  seasonal  luxuries  into  staple  commodities 
of  everyday  and  universal  consumption.  This  mechanism 
is  composed  of  three  kinds  of  organizations:  one  to  pack 
the  fruit,  one  to  sell  it,  and  one  to  furnish  the  facilities  for 
selling.  The  growers  own  the  packing  associations,  the 
packing  associations  own  the  district  exchanges,  and  the 
district  exchanges  own  the  central  exchange.  Therefore 
the  growers  own  the  entire  exchange  system.  No  outside 
authority  dictates  their  policies,  and  their  efficient  organiza- 
tion is  due  to  their  own  constructive  originality,  guided  by 
those  aggressive  and  wise  leaders  whom  they  have  had  the 
good  judgment  to  secure  and  follow.  There  is  no  feature 
in  the  exchange  system  which  is  not  strictly  cooperative — 
growers,  associations,  district  exchanges,  all  have  an  equal 
standing  and  equal  opportunity  in  the  Exchange.  The  sys- 
tem is  a  real  marketing  democracy. 


CHAPTER  IX 

VALUE  OF  THE  EXCHANGE  SYSTEM,  MEASURED  BY 
RESULTS  IN  CALIFORNIA 

This  sort  of  a  study  in  cooperative  method  would  be 
comparatively  valueless  if  it  described  only  the  form  of 
organization  of  the  various  societies  and  the  functions  these 
bodies  are  supposed  to  perform.  No  matter  how  splendid 
the  organization,  we  want  to  know  what  it  has  done  and 
what  it  can  do.  If  the  system  of  cooperation  as  worked 
out  by  the  California  citrus  growers  cannot  exhibit  a  record 
of  actual  accomplishments  far  superior  to  those  obtained 
through  the  methods  employed  by  other  farmers  in  the 
marketing  of  their  crops  it  has  little  to  offer  as  one  mode 
of  attack  on  the  vast  problem  of  food  distribution.  How 
then  does  an  organized  agricultural  industry  carry  on  its 
operations,  what  does  it  do,  what  has  it  done  that  un- 
organized industries  have  failed  to  do? 

It  is  but  fair  to  take  up  the  purposes  of  the  exchange 
system  as  set  forth  in  the  contract  between  the  California 
Fruit  Growers  Exchange  and  its  members  and  inquire  to 
what  extent  each  has  been  realized.  The  first  purpose  of 
forming  the  organization  was  to  lessen  the  cost  of  market- 
ing. How  cooperation  has  furthered  the  production  of 
citrus  fruits  need  not  be  considered  at  this  point.  Attention 
will  be  devoted  to  processes  of  marketing  proper,  namely, 
packing,  transportation,  refrigeration,  selling  and  the  col- 
lection of  proceeds.  Before  the  era  of  cooperation,  ship- 
pers charged  about  fifty  cents  a  box  for  packing.  Now  an 
incomparably  superior  pack  costs  slightly  over  thirty  cents 

147 


148  COOPERATIVE    MARKETING 

a  box  when  the  fruit  is  handled  by  the  associations,  and 
independent  packers  and  shippers  are  compelled  to  render 
the  service  for  about  the  same  price  or  run  the  risk  of 
alienating  their  customers.  This  tremendous  saving  is 
chiefly  ascribable  to  four  causes :  ( i )  the  purchasing  of 
packing  supplies  at  large  discounts  through  a  cooperative 
supply  company;  (2)  the  introduction  of  efficient  machinery 
which  makes  a  large  part  of  the  work  around  the  packing 
house  automatic;  (3)  the  regularization  of  the  packing 
season  by  giving  the  manager  control  over  deliveries  so 
that  the  plant  may  operate  steadily;  (4)  the  elimination 
of  the  profits  of  packing.  Since  1894,  the  year  in  which 
the  Southern  California  Fruit  Exchange  was  organized, 
through  191 6,  the  citrus  shipments  for  the  entire  industry 
have  approximated  228,000,000  boxes.  Let  us  assume  a 
saving  in  packing  of  fifteen  cents  a  box;  the  total  gain  to 
the  growers  would  be  $34,200,000.  Of  course  these  figures 
only  pretend  to  be  illustrative,  but  they  show  how  a  reduc- 
tion in  cost  of  a  few  cents  on  each  box  grows  to  large 
figures  within  a  short  time. 

In  the  matter  of  railroad  rates  the  individual  shipper  is 
at  a  hopeless  disadvantage.  He  has  to  accept,  without 
question,  the  kind  of  service  and  the  rates  which  the  rail- 
roads offer.  To  be  sure,  he  may  refuse  to  ship  and  thus 
escape  an  onerous  rate,  but  there  is  never  any  thought  of 
trying  to  force  the  railroads  to  grant  a  better  one.  An 
organized  industry  has  a  much  stronger  motive  for  seeking 
transportation  concessions,  for  its  shipments  are  massed, 
instead  of  being  scattered  out  until  the  saving  to  any  indi- 
vidual becomes  almost  negligible.  It  also  has  the  financial 
power  to  back  its  demands  and  take  the  necessary  legal 
steps  for  putting  to  the  test  its  contention  of  unreasonable 
rates  or  inadequate  service.  Formerly  the  freight  rate  on 
oranges  to  the  most  important  markets  was  $1.25  a  hundred 


ACTUAL  RESULTS  IN  CALIFORNL^   149 

pounds.  Principally  through  the  pressure  brought  to  bear 
by  the  cooperative  system  the  rate  was  reduced  to  $1.15 
a  hundred.  The  lemon  rate  has  been  a  matter  of  continual 
controversy  and  litigation,  and  it  will  be  reviewed  in  con- 
nection with  the  activities  of  the  Citrus  Protective  League. 
It  is  enough  to  note  here  that  the  carriers  have  been  forced 
to  establish  a  rate  of  $1  a  hundred  pounds  instead  of  their 
earlier  rates  of  $1.25  and  $1.10.  These  savings  of  ten 
cents  a  box  on,  say,  17,000,000  boxes  a  year  are  no  in- 
significant tribute  to  the  effectiveness  of  cooperation. 

The  legal  aspects  of  the  refrigeration  question  will  be 
treated  with  the  Citrus  Protective  League,  but  the  technical 
aspects  are  in  order  here.  About  half  of  the  oranges  and 
12  to  15  per  cent,  of  the  lemons  go  forward  under  ice. 
Thus  the  refrigeration  charges  of  $62.50  to  $75  a  car 
to  the  principal  markets  amount  in  a  year  to  a  large  sum. 
According  to  the  old  plan,  the  fruit  was  loaded  in  the  cars, 
the  bunkers  were  filled  with  ice,  and  the  car  started  rolling. 
From  time  to  time  on  the  journey  the  ice  was  replenished. 
This  method  did  not  give  complete  satisfaction,  for  the 
fruit  at  the  center  of  the  car  did  not  become  thoroughly 
chilled  for  some  time,  and  often  the  first  few  days  of  the 
journey  across  Arizona  was  exactly  the  period  in  which 
the  fruit  most  needed  refrigeration  if  the  danger  of  decay 
was  to  be  minimized. 

Moreover,  there  was  continual  difficulty  in  obtaining  the 
proper  icing  services  from  the  railroads.  Finally  it  was 
discovered  that  if  the  fruit  was  thoroughly  chilled  before 
loading  on  the  car  and  the  bunkers  filled,  no  more  refrigera- 
tion would  ordinarily  be  needed  on  the  transcontinental 
journey.  This  method  is  known  as  prc-cooling  and  prc- 
icing.  Of  course,  this  form  of  refrigeration  is  infinitely 
superior  to  the  other.  However,  the  railroads  offered  to 
perform  the  prc-cooling  and  refrigeration  service  for  seven- 


150  COOPERATIVE    "MARKETING 

teen  and  one-half  cents  a  packed  box.  But  some  associa- 
tions found  that  they  could  build  their  own  pre-cooling 
plants,  make  their  own  ice,  and  still  pre-cool  and  pre-ice 
their  cars  at  much  lower  costs  than  railroad  refrigeration 
would  entail.  Therefore  many  of  the  more  progressive 
associations  have  installed  their  own  refrigeration  facilities 
and  are  making  additional  savings  through  cooperation. 

Before  the  assocations  entered  the  field,  shippers  and 
commission  men  were  accustomed  to  charge  7  to  lo  per  cent, 
on  the  gross  sales  for  selling.  The  cost  of  the  exchange 
system  for  its  entire  service  is  never  as  high  as  3  per  cent, 
on  gross  sales,  and  this  service  includes  numerous  items 
that  could  not  possibly  be  furnished  by  commission  mer- 
chants. Such  a  tremendously  improved  marketing  medium 
has  been  developed  through  the  cooperative  organizations 
that  it  would  be  unfair  to  attempt  to  compute  the  savings 
that  have  been  effected.  Marketing  service  when  applied 
to  exchange  methods  is  really  not  the  same  commodity 
that  used  to  be  bought  from  commission  men.  Just  as  in 
the  case  of  packing,  too,  the  activity  of  the  exchange  has 
forced  shippers  to  lower  their  charges  or  go  out  of  busi- 
ness. Perhaps  5  per  cent,  on  the  gross  sales  would  be  a 
reasonable  estimate  of  the  selling  costs  of  the  citrus  growers 
who  still  consign  on  commission.^ 

Obviously  it  is  impossible  to  compute  accurately  the  total 
of  the  financial  benefits  the  citrus  industry  has  received 
through  cooperation.  When  under  the  old  methods  4,000 
cars  could  not  be  profitably  sold  and  now  under  cooperation 
50,000  cars  can  be  marketed  annually  it  might  seem  that 
the  total  price  received  for  all  the  cars  above  4,000  a  year 
might  properly  be  credited  to  cooperation.  But  basing  the 
calculation  on  the  costs  of  packing,  transportation,  refrig- 

^  This  is  the  estimate  made  by  Powell  in  his  report  for  1912-13  to 
the  California  Fruit  Growers  Exchange. 


ACTUAL    RESULTS    IN    CALIFORNIA      151 

eration  and  selling  before  and  during  the  cooperative  era 
and  multiplying  by  the  number  of  boxes  each  year  shipped 
by  the  exchange  or  by  the  whole  industry,  according  as  the 
saving  applied  to  exchange  members  or  to  all  growers,  the 
hypothetical  saving  effected  by  cooperation  is  found  to  be 
about  $100,000,000.  Mr.  B.  A.  Woodford,  for  many  years 
General  Manager  of  the  California  Fruit  Growers  Ex- 
change, probably  does  not  overshoot  the  mark  when  he 
says  in  a  short  statement  about  the  cooperative  system : 

The  net  result  of  these  changed  conditions,  reduced  to 
a  money  basis,  shows  that  the  savings  that  have  been  made 
amount  in  themselves  to  much  more  than  the  growers  now 
receive  as  interest  on  their  investment,  which  demonstrates 
conclusively  that  without  these  savings,  through  improved 
conditions  brought  about  by  cooperation,  the  citrus  fruit 
business  would  be  disastrously  unprofitable. 

Second  among  the  purposes  is  insuring  the  collection  of 
sales.  Formerly  brokers  were  accustomed  to  charge  5  per 
cent,  on  sales  for  guaranteeing  the  collection  and  trans- 
mission of  proceeds.  To  be  sure,  not  all  shippers  had  their 
collections  guaranteed,  but  the  fact  that  5  per  cent,  would 
be  paid  by  some  shows  that  the  risks  of  loss  through  bad 
debts  and  the  transmission  of  funds  were  considerable. 
Whether  the  grower  insured  his  sales  with  his  broker  or 
assumed  the  risks,  he  was  losing  heavily,  for  these  addi- 
tional costs  had  to  be  deducted  from  his  gross  returns. 
Under  the  exchange  system,  the  representatives  of  the 
California  Fruit  Growers  Exchange  have  as  one  of  their 
duties  the  collection  of  sales  and  the  transmission  of  funds. 
None  but  a  cash  business  is  transacted.  At  the  conclusion 
of  each  sale  the  agent  of  the  Exchange  receives  the  pur- 
chaser's check,  deposits  it  in  a  bank,  and  immediately  draws 
a  check  for  the  full  amount  in  favor  of  the  California  ship- 
per. No  additional  charge  is  made  for  this  collection,  nor 
are    collections    guaranteed,    but    so    successful    have    the 


152  COOPERATIVE    MARKETING 

agents  been  in  this  part  of  their  work  that  the  losses  from 
all  causes,  such  as  bad  debts,  failures  in  business,  etc.,  since 
the  discontinuance  of  the  California  Fruit  Agency  in  1904 
have  been  but  about  $7,688,  on  a  total  f.  o.  b.  business  of 
approximately  $192,000,000,  or  a  loss  of  about  1-250  of 
I  per  cent,  on  sales.'  This  record  of  financial  manage- 
ment would  be  highly  gratifying  in  almost  any  commercial 
undertaking  and  is  an  emphatic  contradiction  of  the  belief 
that  farmers  have  not  the  ability  to  organize  an  efficient 
business  institution. 

The  third  object  as  stated  in  the  agreement  is  facilitating 
the  collection  of  damage  claims.  Damage  claims  are  en- 
tered chiefly  against  the  railroads  and  car  companies  and 
may  arise  from  several  causes  such  as  overcharge,  rough 
handling,  undue  delay,  insufficient  refrigeration,  pilferage 
or  freezing  in  transit.  Under  the  system  of  individual 
shipments  there  was  rarely  a  thought  of  entering  claims 
for  damages  against  the  carriers  and  little  prospect  of  col- 
lecting those  that  were  entered.  The  exchange  system 
specifically  provides  that  the  prosecution  of  claims  is  to 
be  one  of  its  functions.  And  in  order  that  claims  shall 
be  entered  whenever  damage  is  sustained,  no  matter  if  the 
amount  be  so  small  that  an  association  would  not  consider 
it  worth  while  to  set  the  machinery  of  reparation  in  mo- 
tion, the  traffic  department  of  the  central  exchange  is  em- 
powered to  handle  all  claims,  making  the  expense  of  their 
collection  a  general  selling  charge  against  total  shipments 
but  crediting  the  amounts  recovered  to  the  associations 
that  have  suffered  the  injury.  By  means  of  the  system  of 
inspections  of  the  cars  en  route  by  agents  of  the  Exchange 
it  is  entirely  possible  that  a  claim  for  damages  may  be 
well  under  way  before  the  car  has  reached  its  destination, 
while  under  the  old  system  the  injury  would  not  come  to 

-  Figures  compiled  from  the  annual  reports  of  the  general  manager 
of  the  California  Fruit  Growers  Exchange. 


ACTUAL    RESULTS    IN    CALIFORNIA      153 

light  until  the  car  was  unloaded,  and  then  often  it  was  too 
late  to  do  anything. 

That  the  exchange  system  is  not  hesitant  about  asserting 
its  rights  to  redress  is  evidenced  by  the  fact  that  as  many 
as  11,600  claims  have  been  presented  during  one  year 
(1914-1915),  and  that  damages  are  not  demanded  without 
due  cause  appears  from  the  fact  that  in  some  85  or  90 
per  cent,  of  the  claims  presented  damages  are  awarded  and 
collected.  The  railroads  now  realize  that  remissness  on 
their  part  when  handling  an  exchange  shipment  is  almost 
tantamount  to  an  awarded  damage  claim.  Of  course  the 
result  has  been  a  much  improved  transportation  service. 
Though  claims  are  handled  through  the  traffic  department 
of  the  California  Fruit  Growers  Exchange  they  are  in- 
itiated by  the  district  exchange  in  whose  name  the  fruit 
goes  forward.  Since  the  organization  of  the  California 
Fruit  Growers  Exchange  a  certain  district  exchange  has 
collected  on  claims  almost  50  per  cent,  more  than  the  total 
cost  of  its  own  operation.  For  the  entire  period  in  which 
the  Exchange  has  been  rendering  this  service  it  has  ac- 
complished the  following  results: 

Claims  Collected  by  the  California  Fruit  Growers  Exchange.' 

Number  of  Claims  Paid.  Amount. 

1904-5 2102  $  37,529 

1905-6 6059  114,776 

1906-7 4217  96,021 

1907-8 7178  152,344 

1908-9 6067  125,461 

1909-10 5644  93.200 

1910-11 6839  117,057 

1911-2 6280  125,706 

1912-3 6633  1 14,655 

1913-4 5745  108,428 

1914-5 11,599  142,005 

1915-6 11,364  III.557 

3  California  Fruit  Growers  Exchange:  Annual  Reports  of  the  Gen- 
eral Manager,  1909-10  to  1914-15. 


154  COOPERATIVE    MARKETING 

Thus,  much  more  than  $1,000,000  is  clearly  ascribable 
to  cooperation,  for  the  size  of  the  average  claim  is  only 
about  $20,  and  an  individual  would  scarcely  undertake  to 
sue  a  railroad  for  the  restitution  of  such  a  sum.  Because 
the  Exchange  has  never  stopped  to  consider  the  amount 
of  the  injury  when  a  principle  was  at  stake  claims  are  now 
settled  with  despatch  and  without  litigation,  for  the  rail- 
roads know  that  unless  an  agreement  is  reached  the  case 
will  be  fought  through,  and  they  know  that  the  Exchange 
has  the  data  for  winning  most  of  its  cases. 

Fourth  among  the  enumerated  purposes  is  the  improve- 
ment of  the  product  and  the  package.  The  product  is  im- 
proved in  various  ways.  First,  cultural  skill  is  encouraged 
by  the  rivalry  of  growers  to  obtain  the  greatest  proportion 
of  their  fruit  in  the  higher  grades  under  the  pooling  sys- 
tem. To  assist  in  this  worthy  competition  the  exchange 
system,  in  connection  with  the  Fruit  Growers  Supply  Com- 
pany and  the  Citrus  Protective  League,  places  before  its 
members  any  significant  improvements  in  orchard  methods 
that  may  have  been  made.  Effective  fumigation  and  frost 
protection  have  come  in  for  considerable  attention,  and 
a  recent  development  that  is  likely  to  prove  of  the  utmost 
significance  is  the  discovery  that  citrus  trees  vary  tremen- 
dously in  productiveness.  Mr.  A.  D.  Shamel,  of  the  United 
States  Department  of  Agriculture,  has  made  some  epoch 
making  studies  in  which  he  has  proved  that  variation  in 
yield,  texture  and  regularity  of  bearing  of  citrus  trees  are 
transmissible  through  budding.  His  investigations  show 
that  by  eliminating  unprofitable  trees  by  rebudding  to 
proved  stocks  the  yield  to  the  acre  can  probably  be  increased 
by  50  per  cent.*     These  discoveries  were  at  once  brought 

*  Shamel :  "A  Study  of  the  Improvement  of  Citrus  Fruits  Through 
Bud  Selection,"  U.  S.  Department  of  Agriculture,  Bureau  of  Plant 
Industry,  Circular  No.  77,  191 1;  cf.,  also  a  letter  from  A.  D.  Shamel 
to  G.  Harold  Powell,  December,  1912. 


ACTUAL    RESULTS    IN    CALIFORNIA      155 

to  the  attention  of  members  with  the  result  that  both  the 
quality  and  quantity  of  fruit  produced  in  the  future  are  cer- 
tain to  be  improved.  Much  of  the  campaign  against  various 
forms  of  fruit  pests  as  well  as  the  putting  into  effect  of 
methods  for  their  control  is  ascribable  to  the  cooperative 
organization  of  the  citrus  industry. 

Second,  care  in  handling  the  fruit  is  made  obligatory 
on  all  members,  because  the  reputation  of  the  entire  system 
cannot  be  jeopardized  to  humor  the  shiftlessness  of  a  few 
individuals.  Under  the  old  plan  the  ordinary  grower  had 
no  reputation  to  maintain  so  he  tried  to  get  to  market  the 
greatest  possible  quantity  of  oranges  or  lemons  at  the  least 
possible  cost,  paying  little  heed  to  anything  but  immediate 
returns.  Thus  buyers  were  constantly  swindled  by  securing 
fruit  that  was  in  poor  condition  on  arrival  or  which  rapidly 
became  unsalable.  Of  course  these  sins  reacted  upon  the 
growers  themselves,  until  the  annual  losses  from  decay 
were  estimated  around  the  $1,000,000  mark,  and  the  loss 
of  confidence  in  California  oranges  by  the  trade  resulted 
in  low  prices  and  thus,  indirectly,  in  additional  losses. 

For  the  purpose  of  studying  these  losses  from  decay  the 
United  States  Department  of  Agriculture,  beginning  in 
1903-04,  made  an  elaborate  series  of  investigations,  in 
which  it  was  shown  that  the  causes  of  decay  were  not  due 
to  certain  kinds  of  soil  or  climate  or  location,  to  different 
times  of  picking  or  to  a  poor  transportation  service,  but 
were  directly  attributable  to  injuries  due  to  careless  methods 
of  handling  in  field  and  packing  house.  Pickers  were  paid 
by  the  box  and  were  allowed  to  use  clippers  which  scratched 
large  quantities  of  fruit.  Little  care  was  used  in  transfer- 
ring fruit  from  picking  bag  to  box,  in  loading  or  in  haul- 
ing. Each  grower  supervised  his  own  picking  and  the 
associations,  not  realizing  the  damage  from  careless 
handling,  did  not  try  to  enforce  rules  against  mechanical 


156  COOPERATIVE    MARKETING 

injuries.  In  the  packing  house,  fruit  was  injured  in  the 
washer  or  brusher,  in  the  drying  racks,  and  in  fact  all 
through  the  various  packing  processes.  Mr.  G.  Harold 
Powell,  who  w'as  in  charge  of  the  Government's  investiga- 
tions, soon  showed  that  there  was  nothing  mysterious  about 
decay,  that  it  was  simply  due  to  blue  mold  spores  entering 
mechanically  injured  fruit.  He  also  showed  that  a  house 
could  have  as  much  or  as  little  decay  as  it  wanted.  With 
careful  picking,  careful  and  prompt  packing,  and  shipping 
under  the  proper  temperature  conditions,  practically  all  de- 
cay would  be  eliminated. 

When  the  associations  learned  that  little  or  no  decay 
developed  in  sound  fruit  the  response  was  prompt  and  gen- 
eral. Pickers  and  packers  were  instructed  to  use  care  in 
the  various  operations  and  were  supervised  to  see  that  the 
instructions  were  followed.  Picking  was  placed  more  and 
more  under  the  control  of  the  house.  The  packing  ma- 
chinery was  simplified,  and  general  improvements  in  pack- 
ing and  shipping  procedure  were  introduced  until  now 
decay  in  transit  is  no  longer  a  bugbear.  Some  associations 
with  the  strictest  supervision  and  best  packing  equipment 
now  go  through  an  entire  season  with  less  than  i  per  cent, 
decay,  while  formerly  lo  per  cent,  decay  was  not  at  all  un- 
usual. In  fact  the  cooperative  organizations  go  further 
and  are  not  satisfied  merely  to  have  their  shipments  arrive 
in  good  condition.  If  decay  starts  soon  after  unloading, 
jobbers  and  retailers  will  be  reluctant  to  handle  the  fruit, 
so  the  aim  of  associations  is  now  to  put  out  a  product  which 
will  remain  sound  until  ample  time  for  consumption  is 
aflForded.  In  meetings  of  the  associations,  district  ex- 
changes and  central  exchange  the  importance  of  good  fruit 
properly  handled  is  constantly  emphasized,  and  the  organ- 
ization of  the  industry  makes  possible  the  widest  utiliza- 
tion of  such  improvements  as  those  worked  out  by  the 


ACTUAL    RESULTS    IN    CALIFORNIA      157 

Bureau  of  Plant  Industry.  Indeed  the  chief  of  the  Bureau 
in  his  letter  of  transmissal  of  Mr.  Powell's  report  says: 
"Largely  as  a  result  of  the  thorough  organization  of  the 
industry,  and  the  active  cooperative  spirit  shown  by  the 
leading  men  in  it,  a  prompt  and  general  modification  of 
methods  has  resulted  and  is  still  in  progress."' 

A  third  way  in  which  the  product  is  improved  is  by 
making  the  grading  much  more  strict.  Standardization  of 
fruit  and  vegetables  has  always  been  difficult,  but  the  asso- 
ciations realize  that  business  stability  for  the  industry  de- 
pends on  a  reliable  pack.  Therefore,  brands  are  adopted 
and  so  far  as  possible  maintained,  and  jobbers  soon  learn 
to  know  the  reliable  brands  and  offer  for  these  higher  f .  o.  b. 
prices  or  give  them  the  preference  on  the  auction.  That 
standardization  of  output  may  not  be  confined  to  individual 
associations  while  diversity  of  standards  for  grading  per- 
sists as  among  the  various  associations,  the  California  Fruit 
Growers  Exchange  has  established  a  field  department,  one 
of  whose  functions  is  to  cooperate  with  the  different  asso- 
ciations toward  securing  uniformity  in  grading  throughout 
the  exchange  system.  Besides  the  name  of  the  association, 
the  "Sunkist"  trade  mark  of  the  California  Fruit  Growers 
Exchange  appears  on  the  wrappers  of  the  best  brands  of 
fruit  shipped  through  the  exchange.  It  would  be  unjust 
to  an  association  making  rigid  requirements  for  Sunkist 
fruit  if  another  having  lower  requirements  were  allowed 
to  ship  under  the  same  brand,  so  the  field  department  of 
the  Exchange  is  responsible  for  standardizing  the  grades 
and  pack  of  all  associations.  Thus  both  the  citrus  industry 
and  the  fruit  trade  are  beneficially  affected  by  the  coopera- 
tive system. 

*  For  this  whole  study  of  decay  and  the  prompt  response  of  the 
citrus  industry,  see  Powell :  "The  Decay  of  Oranges  While  in  Transit 
from  California,"  U.  S.  Department  of  Agriculture,  Bureau  of  Plant 
Industry,  Bulletin  No.   J23,   1908. 


158  COOPERATIVE    MARKETING 

Fourth,  the  product  is  improved  by  reducing  the  time 
element  in  connection  with  citrus  shipments  to  systematic 
precision  instead  of  leaving  it  to  chance.  By  having  a 
comprehensive  market  information  mechanism  at  their 
disposal  managers  of  packing  houses  can  time  their 
picking  according  to  the  needs  of  the  market,  and  when 
a  demand  is  foreseen  picking,  packing  and  trans- 
portation are  timed  so  as  to  lay  the  fruit  down  at  the  right 
instant.  Formerly  oranges  were  picked  and  when  it  be- 
came convenient  to  the  grower  were  hauled.  Then  the 
house  often  packed  them  at  leisure  and  either  allowed  them 
to  lie  around  or  forwarded  them  and  allowed  the  cars  to 
stand  on  track  several  days  in  some  Eastern  market.  In 
due  time  the  cars  of  unattractive  fruit  were  sold  to  dis- 
satisfied buyers.  Now  picking  and  hauling  are  synchronous, 
packing  is  done  with  despatch,  expedited  service  is  de- 
manded of  the  carriers  and  the  trade  is  furnished  with 
fresh,  reliable  goods.  So  long  as  distribution  was  indi- 
vidual it  had  to  be  fortuitous;  now  the  time  element  in 
marketing  takes  a  coordinate  place  with  growing  and  pack- 
ing toward  supplying  the  market  with  a  fresh,  sound,  de- 
sirable product. 

Fifth,  cooperation  can  control  the  problem  of  frozen  and 
immature  fruit  shipments  where  the  individual  is  helpless. 
Mr.  Powell  well  states  the  case : 

Unregulated  competition  between  shippers  has  unfortu- 
nately defeated  every  effort  to  control  food  questions  of 
this  nature,  because  the  average  grower  and  shipper  will 
violate  the  fundamental  principles  of  sound  business  in 
order  to  compete  with  his  neighbor  whenever  he  thinks  he 
will  receive  a  higher  temporary  return,  no  matter  what  the 
effect  may  be  on  the  future  of  his  own  prices  or  on  the  in- 
dustry as  a  whole.® 

^  California  Fruit  Growers  Exchange :  Annual  Report  of  the  Gen- 
eral Manager,  1913-14. 


ACTUAL    RESULTS    IN    CALIFORNIA      159 

Frozen  fruit  used  to  be  a  constant  source  of  annoyance 
and  loss.  Shippers  often  forwarded  fruit  which  they  had 
every  reason  to  beHeve  had  been  frosted,  and  the  trade  was 
getting  to  distrust  the  California  product.  However,  the 
difficulty  in  eliminating  frozen  stock  was  almost  insur- 
mountable, for  until  recently  there  was  no  method  of  know- 
ing whether  an  orange  was  injured  or  not  except  by  cutting 
it.  To  throw  out  a  man's  entire  crop  because  25  per  cent, 
of  it  had  been  frosted  was  such  heroic  treatment  that  some 
associations  or  growers  would  ship  a  partially  damaged 
crop,  to  the  great  injury  of  the  rest  of  the  industry.  Against 
such  practices  the  exchange  system  took  a  firm  stand.  It 
demanded  that  only  good  fruit  should  be  shipped,  and  if 
damaged  fruit  did  by  any  chance  get  into  the  pack  the  in- 
jured party  must  receive  prompt  and  full  restitution.  The 
problem  is  not  now  so  serious,  for,  in  191 3,  Mr.  Frank 
Chase  of  Riverside  devised  a  water  separator  for  frozen 
oranges.  This  invention  was  not  patented  but  was  pre- 
sented to  the  whole  citrus  industry  and  will  form  a  lasting 
tribute  to  Mr.  Chase's  public  spiritedness. 

Immature  fruit  formed  a  separate  problem.  There  has 
always  been  a  strong  inducement  to  ship  to  the  favorable 
holiday  market,  but  sometimes  the  fruit  was  picked  quite 
green  and  was  artificially  colored.  In  this  manner  con- 
sumers were  deceived  into  buying  sour  fruit.  Consequently 
the  reputation  of  California  oranges  for  sweetness  was 
rapidly  falling.  The  Tulare  region  was  the  worst  sinner 
in  shipping  immature  fruit,  and  affairs  got  so  serious  that 
the  United  States  Board  of  Food  and  Drug  Inspection  had 
to  intervene.  By  food  inspection  decision  number  133, 
issued  in  March,  191 1,  the  Board  decided  that  green 
oranges  that  had  been  artificially  colored  by  sweating  were 
adulterated  under  the  meaning  of  the  Food  and  Drugs 
Act.    This  ruling  put  an  end  to  shipping  unlabelled  sweated 


i6o  COOPERATIVE    MARKETING 

fruit  which  was  unfit  for  food,  but  it  did  not  stop  the  ship- 
ping of  sour  fruit  as  long  as  no  sweating  was  done  or  if 
the  boxes  were  labelled  "Color  of  fruit  accelerated  by 
sweating."  So  other  remedies  were  required.  Finally  the 
United  States  Department  of  Agriculture  decided  that 
sweated  oranges  are  fit  for  food  when  the  ratio  of  soluble 
solids  in  the  juice  to  the  citric  acid  is  not  greater  than  eight 
to  one.  This  is  known  locally  as  the  eight  to  one  standard, 
and  in  putting  it  into  effect  the  exchange  system  took  a 
leading  part,  even  in  some  respects  making  its  own  require- 
ments more  rigid  than  the  Government's. 

The  season  of  191 4- 15  was  the  first  in  which  growers 
agreed  to  ship  no  fruit  that  did  not  come  up  to  the  eight 
to  one  standard,  and  the  results  on  the  market  of  taking 
such  a  stand  were  highly  gratifying.  The  steadying  effect 
of  the  exchange  system  upon  individual  selfishness  was 
forcefully  demonstrated  by  the  manner  in  which  the  Cali- 
fornia Fruit  Growers  Exchange  management  jolted  back 
into  line  one  recalcitrant  association  which  attempted  to 
disregard  the  regulations  as  to  quality.''  It  therefore  should 
be  evident  from  this  general  account  that  the  exchange 
system  has  markedly  improved  the  product  in  the  past  and 
is  likely  to  continue  in  the  same  policy. 

As  to  the  package  not  so  much  can  be  said.  The  chief 
improvement  along  this  line  has  been  the  reduction  of 
costs.  However,  substantial  enough  advance  has  been  made 
to  place  the  pack  of  the  members  of  the  California  Fruit 
Growers  Exchange  at  the  very  front  of  the  fruit  industry 
with  reference  to  the  attractiveness  and  uniformity  of  its 
output.  New,  machine  made  and  machine  covered  boxes 
are  packed  with   the  utmost  precision.      Each     fruit    is 

"^  Compare  for  a  fuller  discussion  of  the  problem  of  immature  fruit, 
Towt:  "Picking  Oranges  Under  the  New  Government  Regulations," 
University  of  California,  Journal  of  Agriculture,  March,  1915,  pp. 
219-220;  also  Coit :     "Citrus  Fruits,"  pp.  282-289. 


ACTUAL    RESULTS    IN    CALIFORNIA      i6i 

wrapped  in  tissue,  curtains  are  often  added  to  the  highest 
grades,  and  the  lithographic  work  on  the  labels  is  the  finest 
obtainable.  The  best  test  of  the  truth  of  these  remarks 
is  an  actual  comparison  of  the  citrus  boxes  bearing  "Cali- 
fornia Fruit  Growers  Exchange"  on  the  side  with  the  boxes 
of  Florida  or  Italian  houses.  After  such  a  comparison 
there  will  be  little  doubt  as  to  which  will  appeal  most 
strongly  to  the  trade.  In  fact,  it  is  a  common  observation 
that  were  it  not  for  California's  attractive  pack  and  her 
marvellous  selling  organization  her  oranges  could  not  com- 
pete with  those  of  other  sections. 

Another  object  set  forth  in  the  agreement  is  "to  increase 
the  consumption  of  citrus  fruit  by  developing  new  markets 
and  to  aid  in  supplying  all  the  people  with  good  fruit  at 
a  reasonable  price."  Furthermore,  expenses  are  permitted 
to  be  incurred  for  "proper  and  judicious  advertising."  The 
exchange  system  has  adopted  four  general  policies  for  en- 
larging the  demand  for  citrus  fruits.  First,  a  campaign 
of  national  advertising  is  a  recognized  part  of  the  year's 
business,  and  its  cost  is  assessed  equally  upon  all  boxes 
shipped,  along  with  the  selling  charges. 

Before  proceeding  to  the  methods  employed  the  question 
should  be  answered,  Why  is  any  advertising  at  all  neces- 
sary? For  the  answer  we  must  turn  to  the  statistics  of 
citrus  production.  From  1894-95,  the  year  before  the 
Southern  California  Fruit  Exchange  began  operations,  to 
1913-14  shipments  of  citrus  fruits  from  California  in- 
creased more  than  580  per  cent,  while  the  population  of 
the  United  States  increased  by  only  some  56  or  57  per  cent. 
In  addition,  shipments  from  Florida  and  other  places  have 
grown  almost  as  rapidly.  And  this  rapid  expansion  shows 
no  signs  of  abating.  According  to  figures  prepared  in  19 15 
by  the  field  department  of  the  California  Fruit  Growers 
Exchange,  some  85,000  acres  of  citrus   fruits  are  yet  to 


i62  COOPERATIVE    MARKETING 

come  into  bearing  in  California.*  These  plantings  will  in 
a  few  years  increase  the  output  of  Washington  navel 
oranges  by  almost  one-half,  and  will  double  the  crop  of 
Valencia  oranges  and  lemons.  Under  such  circumstances 
the  question  of  how  to  make  the  markets  expand  at  the 
same  rate  as  production  is  a  grave  one  indeed.  The  general 
economic  proposition  that  the  demand  for  products  at  a 
remunerative  price  governs  the  quantity  that  will  be  fur- 
nished does  not  apply  without  qualification  to  the  conduct 
of  the  citrus  industry. 

At  the  time  these  new  plantings  were  made  there  was 
undoubtedly  a  prospect  of  making  profits  either  through 
the  production  of  fruit  or  the  production  of  land  values; 
often,  unfortunately,  only  the  latter.  But  some  seven  or 
eight  years  must  elapse  before  citrus  trees  come  into  full 
bearing,  and  in  that  interval  the  situation  may  easily 
change  so  that  under  the  new  conditions  there  would  not 
be  the  slightest  inducement  for  expanding  production.  In- 
deed the  acreage  already  planted  may  not  be  yielding  any 
interest  on  the  investment  at  all,  yet  the  capital  put  into 
these  new  plantings  cannot  be  shifted,  and  production  is 
going  to  increase  as  the  trees  mature,  even  though  the  de- 
mand is  not  adequate  to  absorb  smaller  supplies  at  prices 
that  afford  a  net  income  to  the  grower.  Moreover,  this 
enlarged  production  is  likely  to  be  permanent,  for  after 
$i,ooo  has  been  expended  to  bring  each  acre  into  bearing 
the  grove  is  not  going  to  be  abandoned,  though  the  fruit 
does  not  return  the  actual  money  outlay  for  its  production. 
Any  hope  of  not  losing  the  capital  value  of  the  grove  de- 
pends on  giving  it  thorough  care,  therefore  costs  are  about 
the  same  whether  the  grove  yields  a  profit  or  a  deficit.  The 
annual  cost  of  maintenance  is  extremely  high. 

8  California  Fruit  Growers  Exchange :  Report  of  the  Field  Depart- 
ment, April  9,  1915. 


ACTUAL    RESULTS    IN    CALIFORNIA      163 

It  has  been  only  too  common  to  plant  groves  that  never 
have  been  and  never  can  be  commercial  successes.  Cheap 
land  is  bought  and  trees  are  put  out  in  unfavorable  loca- 
tions, and  all  this  with  the  practical  certainty  that  the  prop- 
erty can  be  sold  at  a  profit.  For  an  orange  or  lemon  tree 
will  look  thrifty  for  a  few  years  in  almost  any  section  of 
southern  or  central  California.  So  credulous  buyers  are 
induced  to  invest,  and  they  only  become  disillusioned  when 
the  trees  ought  to  bear  paying  crops  but  do  not. 

However,  transfers  of  property  are  so  frequent  that  the 
selling  value  of  a  grove  does  not  rapidly  become  equili- 
brated to  its  income  value.  By  the  time  one  newcomer 
begins  to  be  sceptical  about  his  purchase  there  is  a  new 
contingent  of  "greenhorns"  to  whom  he  can  sell,  and  the 
first  man  by  that  time  knows  enough  to  select  a  suitable 
location,  or  more  probably  he  decides  that  orange  growing 
is  not  his  calling.  Thus  property  values  of  unremunerative 
groves  are  maintained  at  a  fictitious  level.  Notoriously  bad 
groves  have  been  known  to  sell  three  times  in  the  same 
year,  each  time  at  an  advance,  when  veteran  orchardists 
agreed  that  they  could  never  be  profitable.®  For  present 
purposes,  the  point  is  that  these  uneconomic  groves  do 
nevertheless  produce  some  fruit  and  that  the  supplies  from 
these  speculative  orchards  depress  prices  for  groves  that 
were  planted  for  legitimate  commercial  purposes. 

Finally,  of  course,  if  the  stream  of  "suckers"  ever  be- 
comes   desiccated    these    counterfeit    groves    will    decline 

»  Perhaps  these  remarks  afford  a  clue  to  the  often  heard  statement 
that  citrus  growing  in  general  is  unprofitable.  Many  groves  have 
been  planted  with  complete  assurance  that  they  could  never  be  profit- 
able. They  were  planted  to  sell,  not  to  bear  fruit.  That  the  per- 
centage of  such  counterfeit  groves  is  considerable  is  indubitable,  but 
how  large  it  is  impossible  to  say.  On  the  other  hand,  some  groves 
have  been  continuously  and  abundantly  profitable,  and  this  fact  has 
bolstered  up  property  values  for  the  whole  industry. 


i64  COOPERATIVE    MARKETING 

markedly  in  price  or  will  be  abandoned  altogether.  This 
thought  was  in  mind  when  in  Chapter  I  the  statement  was 
made  that  elaborate  frost  fighting  apparatus  is  not  likely 
to  be  a  permanent  feature  of  the  citrus  industry.  There 
is  sufficient  land  in  California  which  does  not  require  a 
special  costly  protective  service  amply  to  supply  the  demand 
for  citrus   fruits. 

From  this  review  of  the  vast  increase  in  the  production 
of  citrus  fruits,  of  how  it  comes  about  and  how  it  is  going 
to  continue  for  some  time  at  least,  it  should  be  apparent 
that  finding  a  market  for  these  augmented  supplies  has 
been  and  is  a  difficult  matter.  Since  it  is  the  chief  duty 
of  the  California  Fruit  Growers  Exchange  to  furnish  a 
market  for  the  fruit  of  its  members  it  had  to  devise  some 
means  of  enlarging  the  market.  As  already  noted,  one 
of  these  methods  is  through  advertising.  The  advertising 
campaign  until  recently  was  directed  from  the  Chicago 
office  of  the  Exchange.  The  advertising  department  de- 
votes its  attention  to  telling  the  public  of  the  beneficial 
effects  of  using  oranges  and  lemons  and  to  showing  how 
these  fruits  may  be  used  in  new  and  attractive  ways. 

To  gain  any  benefit  from  advertising  for  itself  as  dis- 
tinguished from  the  industry  in  general  the  publicity  cam- 
paign must  be  focussed  on  its  own  output.  The  Exchange 
has  accomplished  this  by  adopting  two  general  brands, 
"Sunkist"  and  "Red  Ball,"  and  by  directing  attention  to 
them.  In  its  advertising  the  Exchange  fully  recognizes 
that  any  permanent  results  must  be  based  on  the  quality 
of  the  advertised  article,  and  it  emphasizes  the  reliability 
of  its  fruit.  Moreover,  it  makes  good  this  guarantee  of 
reliability.  Therefore  jobbers,  retailers  and  buyers  learn 
that  any  fruit  in  the  "Sunkist"  wrapper  can  be  accepted 
with  entire  confidence,  and  this  brand  comes  to  command 
a  premium  on  the  market. 


ACTUAL    RESULTS    IN    CALIFORNIA      165 

It  should  be  distinctly  understood  that  the  California 
Fruit  Growers  Exchange  and  not  the  local  associations 
owns  the  Sunkist  and  Red  Ball  brands.  The  central  ex- 
change, while  owning  no  fruit,  allows  member  associations 
to  add  the  Sunkist  or  Red  Ball  trademark  to  the  wrappers 
in  which  fruit  that  comes  up  to  a  specified  standard  is 
packed.  For  seeing  to  it  that  associations  live  up  to  the 
grading  requirements,  the  field  department  of  the  central 
exchange  is  responsible.  The  privilege  of  using  the  Sun- 
kist brand  is  another  inducement  to  growers  and  associa- 
tions to  improve  the  quality  of  their  fruit  so  as  to  have  as 
large  a  percentage  as  possible  of  their  total  shipments  ad- 
mitted to  the  advertised  brands.  For  the  expense  of  ad- 
vertising is  assessed  as  a  flat  rate  against  all  boxes  sold, 
hence  houses  with  poor  fruit  receive  less  benefit  than  their 
more  efficient  competitors.  During  recent  years  the  Ex- 
change has  spent  annually  some  $200,000  in  advertising, 
but  this  only  amounts,  when  distributed,  to  one  and  one- 
half  or  two  cents  a  box. 

A  second  method  employed  for  increasing  the  consump- 
tion of  citrus  fruits  is  opening  up  new  markets.  There 
are  numerous  towns  and  villages  that  are  potential  con- 
sumers of  citrus  fruits,  but  they  cannot  absorb  carload 
lots.  Under  the  old  methods  the  demand  of  the  smaller 
places  was  not  supplied,  for  the  California  shipper  was 
compelled  to  send  his  cars  to  a  very  limited  number  of  the 
larger  markets  where  there  would  be  the  most  assurance 
of  disposing  of  his  commodity.  Under  the  exchange  sys- 
tem small  consignments  are  furnished  to  the  trade  of  any 
town  as  the  demand  occurs,  the  half  car.  or  whatever 
amount  is  required,  being  supplied  through  the  nearest 
agent  of  the  exchange.  At  present  2.500  car  lot  jobbers, 
who  employ  7,500  travelling  salesmen,  buy  the  fruit  from 
the  growers'  agents,  divide  the  cars  and  reship  wherever 


i66  COOPERATIVE    MARKETING 

a  sale  can  be  made  to  300,000  retailers.'"  By  this  aggres- 
sive, organized  policy  possibilities  for  placing  a  few  boxes 
of  fruit  in  some  obscure  village  are  detected  and  exploited 
while  formerly  no  individual  shipper  could  possibly  have 
the  means  of  learning  the  wants  of  the  smaller  places. 
Now,  no  retailer,  however  isolated  he  may  be,  need  have 
any  difficulty  in  securing  fruit  in  small  quantities  as  the 
demands  of  his  patrons  occur.  As  the  total  consumptive 
power  of  these  less  than  car  lot  markets  is  enormous,  the 
problem  of  finding  a  market  for  the  increasing  citrus  crop 
has  in  large  part  been  solved  by  being  able  to  turn  this  po- 
tential demand  to  account  through  the  exchange  system  of 
organized  marketing. 

Third,  the  Exchange  definitely  undertakes  to  work  with 
the  jobbers  and  retailers  instead  of  against  them.  Pro- 
ducers of  fruits  and  vegetables,  when  they  have  become 
dissatisfied  with  the  operations  of  middlemen,  have  cus- 
tomarily sought  a  remedy  in  so-called  "direct  selling." 
Reasons  have  been  given  in  Chapter  I  why  plans  for  direct 
selling  on  a  large  scale  must  prove  more  or  less  abortive. 
Instead  of  recognizing  that  jobbers  and  retailers  perform 
useful  functions  that  the  public  demands,  these  direct  sellers 
do  not  see  the  reasonableness  of  simply  asking  whether 
these  functions  cannot  be  performed  more  economically. 
But  the  jobber  and  the  retailer  cannot  be  ignored.  Some- 
body has  to  receive  fruit  and  vegetables,  pay  for  them, 
store  them  until  wanted,  take  them  to  places  where  con- 
sumers have  access  to  them  and  blanket  the  credit  for  those 
who  serve  the  consumers.  All  this  the  jobber  does.  Then 
somebody  must  display  these  products  where  consumers 
are  wont  to  congregate,  must  keep  them  until  sold  (as- 
suming the  risk  of  deterioration),  must  serve  the  customers, 

1°  California  Fruit  Growers  Exchange :  Report  of  the  General  Man- 
ager, 1914-15- 


ACTUAL    RESULTS    IN    CALIFORNIA      167 

deliver  the  articles  and  often  extend  credit  to  the  buyer. 
These  things  the  retailer  does. 

That  each  of  these  series  of  functions  can  be  carried  on 
more  cheaply  when  many  products  are  handled  than  when 
all  the  machinery  has  to  be  supported  by  one  commodity 
is  obvious.  But  the  question  arises :  Have  jobbers  and 
retailers  always  worked  out  the  most  efficient  and  least 
expensive  methods  for  conducting  their  operations?  With 
great  business  acumen  the  Exchange  turns  its  attention  to 
this  question  instead  of  trying  to  eliminate  the  middlemen. 
Even  though  there  has  been  considerable  ill  advised  agita- 
tion among  the  members  to  adopt  the  direct  selling  chimera, 
the  Exchange  has  calmly  pursued  its  sound  policy  of  con- 
fining its  efforts  to  enabling  the  jobbers  and  retailers  to 
reduce  their  costs  and  risk  and  thus  handle  citrus  fruits 
on  a  narrower  margin.  Exchange  advertising  accelerates 
the  turnover  of  its  brands,  thereby  reducing  the  risk  of 
deterioration.  Jobbers  are  furnished  with  powerful  selling 
arguments  in  the  shape  of  attractive,  reliable  fruit.  Re- 
tailers are  helped  to  increase  their  sales  by  furnishing  them 
with  window  display  material,  by  supplying  them  with 
citrus  arguments,  and  by  showing  them  how  to  arrange 
their  fruit  in  a  manner  that  will  please  customers. ^^  This 
cooperation  of  the  Exchange  with  the  secondary  distribu- 
tors is  an  innovation  in  the  field  of  fruit  and  produce 
marketing.  Such  a  procedure  would  be  utterly  incon- 
ceivable for  an  unorganized  industry. 

Fourth,  the  season  for  marketing  as  well  as  the  territory 
is  materially  extended.  Although  it  is  true  that  the  great 
bulk  of  the  crop  is  moved  from  December  to  June  inclusive. 
California  oranges  and  lemons  may  nevertheless  be  found 

'^  California  Fruit  Growers  Exchange:  Report  of  the  General  Man- 
ager, 1914-15;  cf.  also  Reprint,  the  California  Fruit  Growers  Ejc- 
change,  by  G.  Harold  Powell. 


i68  COOPERATIVE    MARKETING 

upon  the  market  at  any  season.  Instead  of  a  periodic  lux- 
ury citrus  fruits  have  become  a  staple  article  of  food  during 
the  entire  year.  This  result  has  been  accomplished  largely 
by  the  continual  emphasis  which  the  exchange  system  had 
laid  on  crops  of  good  fruit  with  permanent  keeping  qual- 
ities. In  all  of  these  efforts  to  increase  consumption  the 
exchange  has  been  w^orking  along  sound  economic  prin- 
ciples. It  realizes  that  a  large  and  steady  consumption  is 
impossible  unless  good  fruit  is  offered  to  the  purchaser; 
it  further  realizes  that  the  most  benefit  wnll  come  to  the 
industry  through  large  sales  at  moderate  prices,  and  does 
not  deceive  itself  with  the  illusory  hope  of  permanently 
large  sales  at  unreasonable  prices.  It  is  aware  that  every 
reduction  of  cost  means  an  expansion  of  consumption,  so 
it  not  only  tries  to  perfect  its  own  methods  of  growing, 
packing  and  marketing,  but  tries  also  to  help  jobbers  and 
retailers  reduce  their  costs. 


CHAPTER  X 

BENEFITS   OF  COOPERATION   FOR   PRODUCERS  SEEKING 

A  MARKET 

That  the  exchange  system  has  fulfilled  its  purpose  of 
aiding  to  supply  all  the  markets  with  citrus  fruits  is  evi- 
dent, but  has  it  accomplished  its  purpose  of  furnishing  these 
fruits  at  a  reasonable  price?  Unfortunately,  it  is  impossible 
to  answer  this  question  categorically.  No  comparable  fig- 
ures are  available  which  show  the  retail  prices  of  oranges 
and  lemons  for  a  series  of  years,  and  none  of  any  value 
can  be  computed.  Retail  prices  quoted  in  the  papers  are 
meaningless  unless  the  quality  of  the  fruit  quoted  is  known, 
and  there  is  no  way  of  gaining  this  information.  All  that 
can  be  done  is  to  present  the  prices  that  the  exchange  has 
received  for  its  shipments,  f.  o.  b.,  California. 

Prices,  a  Box,  Received  by  the  California  Fruit  Growers  Exchange 
FOR  Citrus  Fruits,  f.  o.  b.,  Californi.\,  1904-05  to  1915-16.^ 

Average  a  box. 

1904-5 $1-37 

1905-6 2.11 

1906-7 2.00 

1907-8 r.77 

1908-9 1.60 

1909-10 1.96 

1910-11 1.91 

1911-12 1.84 

1912-13 2.75 

1913-14 171 

1914-15 1-64 

1915-16 2.29 

^  Figures  computed  from  the  Annual  Reports  of  the  General  Man- 
ager of  the  California  Fruit  Growers  Exchange. 

169 


I70  COOPERATIVE    MARKETING 

These  figures  give  a  simple  average  for  the  twelve  years 
of  $1.91  a  box  and  a  weighted  average  of  $1.89.  In  gen- 
eral prices  have  responded  roughly  to  the  size  of  the  crop 
to  be  marketed,  showing  that  demand  and  not  cost  has 
been  the  governing  factor.  Particularly  striking  was  the 
price  situation  in  the  season  of  the  famous  frost,  1912-13, 
when  actual  shipments  were  only  37.7  per  cent,  of  the  esti- 
mated shipments  and  prices  rose  about  50  per  cent,  above 
the  average.  However,  citrus  fruit  prices  for  California 
are  so  interrelated  with  the  supplies  of  other  fruits  and 
vegetables,  especially  apples  and  Florida  oranges,  that  it 
is  practically  impossible  to  segregate  the  demand  for  Cali- 
fornia oranges  and  lemons  and  then  proceed  to  correlate 
prices  with  land  values,  costs  of  production  and  transporta- 
tion, quantity  of  output,  etc.  If  anything  at  all  can  be 
inferred  from  the  f.  o.  b.  prices  it  is  that  they  have  shown 
a  slight  tendency  to  fall  as  the  industry  has  expanded. 
Even  if  consumers  have  to  pay  as  much  for  each  orange 
ias  formerly,  they  unquestionably  obtain  higher  quality, 
more  reliable  fruit;  and  this  is  tantamount  to  a  reduction 
in  price.  But  the  best  reason  for  concluding  that  retail 
prices  of  citrus  fruits  have  fallen  is  the  fact  that  rapidly 
increasing  quantities  of  fruit  have  been  absorbed  at  an 
almost  constant  f.  o.  b.  price.  These  constant  or  slightly 
declining  f.  o.  b.  prices,  moreover,  have  been  in  the  face 
of  a  rapid  upward  movement  of  general  prices  and  a  par- 
ticularly marked  rise  in  prices  of  agricultural  products. 
Besides,  the  costs  of  transportation,  refrigeration  and  pri- 
mary marketing  have  declined  during  the  period  in  ques- 
tion, and  decay  has  been  minimized,  so  stationary  f.  o.  b. 
prices  imply  reduced  costs  to  jobbers.  Therefore,  unless 
jobbers  and  retailers  are  retaining  a  larger  percentage  of 
the  consumer's  dollar  than  was  formerly  the  case  the  pub- 
lic is  now  able  to  obtain  more  citrus  fruits  for  a  given  ex- 
penditure of  money. 


BENEFITS    OF    COOPERATION  171 

Jobbers  and  retailers,  however,  are  now  handling  a  much 
larger  volume  of  citrus  fruits,  the  markets  are  much  more 
steady,  the  fruit  more  reliable,  and  risks  greatly  diminished, 
so  it  is  probable  that  these  distributors  are  working  on 
narrower  margins  than  formerly.  The  opinions  of  those 
in  a  position  to  know  are  in  support  of  this  statement, 
though  they  admit  little  direct  proof  can  be  advanced. 
Hence,  even  if  no  usable  data  for  retail  prices  are  obtain- 
able, we  may  be  reasonably  certain  that  prices  to  consumers 
have  fallen  materially,  though  by  how  much  it  is  impossible 
to  say.  The  exchange  system,  while  trying  to  reduce  dis- 
tributive costs,  is,  of  course,  striving  to  maintain  or  in- 
crease f.  o.  b.  prices,  and  the  fact  that  f.  o.  b.  prices  have 
been  almost  constant  in  the  face  of  the  enormous  increase 
in  output  is  the  best  commentary  on  the  business  efficiency 
of  properly  organized  cooperation. 

The  foregoing  account  of  the  marked  success  in  market- 
ing which  the  citrus  growers  have  achieved  through  co- 
operation obviously  calls  for  a  description  of  the  marketing 
services  which  have  made  possible  this  success.  The  fa- 
cilities through  which  the  growers  sell  their  own  fruit  are 
furnished  by  the  California  Fruit  Growers  Exchange;  and 
we  must  not  lose  sight  of  the  distinction  between  selling 
fruit  and  furnishing  the  machinery  through  which  others 
sell  fruit.    To  quote  from  a  letter  from  Mr.  Powell : 

The  point  of  view  that  you  should  get  very  clearly  in 
mind  is  the  fact  that  the  California  Fruit  Growers  Ex- 
change does  not  buy  or  sell  the  fruit  of  the  growers.  It 
merely  provides  the  facilities  through  which  the  growers 
market  their  own  product,  but  it  is  not  in  itself  a  selling 
agency.^ 

The  central  exchange  has  absolutely  no  cars  of  fruit  to 
sell,  but  it  docs  put  representatives  in  all  of  the  chief  mar- 
2  Letter  to  the  writer,  dated  November  11,  1912. 


172  COOPERATIVE    MARKETING 

kets  of  the  country  who  are  ready  to  act  as  agents  for 
associations  and  district  exchanges  which  do  have  fruit  to 
sell.  Failure  to  make  this  discrimination  has  been  re- 
sponsible for  the  very  prevalent  notion  of  a  citrus  fruit 
trust  in  California. 

The  clearest  concept  of  how  the  marketing  mechanism 
of  the  California  Fruit  Growers  Exchange  actually  operates 
may  be  had  by  considering  separately  the  organization  and 
duties  of  the  Eastern  representatives  and  the  operations 
of  the  Los  Angeles  office.  At  present  the  territory  of  the 
United  States  and  Canada  is  divided  into  six  grand 
divisions,  each  in  charge  of  a  division  manager.  These 
divisions  center  at  Boston,  New  York,  Chicago,  Minneapo- 
lis, Fort  Worth  and  Seattle.  Then  the  Exchange  main- 
tains agencies  in  seventy-seven  of  the  principal  markets, 
each  agency  reporting  daily  to  the  proper  district  manager. 
The  duties  of  the  agents  are  to  secure  orders  for  fruit,  to 
■sell  fruit  under  the  orders  of  the  district  exchanges  and 
associations,  to  supervise  exchange  sales  on  the  auction, 
to  collect  and  transmit  proceeds,  to  develop  new  customers 
and  new  markets,  to  cooperate  with  jobbers  and  retailers 
and  to  secure  accurate  and  comprehensive  information  as 
to  the  condition  of  the  market.  All  of  the  agents  are 
bonded  and  are  on  salary  rather  than  on  a  commission  basis. 
They  do  nothing  except  attend  to  the  interest  of  the  asso- 
ciated exchange  growers. 

This  latter  point  is  important;  in  fact,  it  is  largely  re- 
sponsible for  the  admirable  efficiency  of  the  exchange  sys- 
ftem.  By  appointing  salaried  agents  whose  sole  occupation 
is  selling  citrus  fruits  the  exchange  system  develops  an 
esprit  de  corps  that  is  impossible  under  ordinary  marketing 
methods.  What  particular  interest  does  the  commission 
man  have  in  his  clients?  He  sells  all  kinds  of  products  for 
all  kinds  of  people,  and  his  welfare  depends  only  on  his 


BENEFITS    OF    COOPERATION  173 

commissions.  He  is  not  going  to  put  forth  special  efforts 
to  sell  the  peaches  of  one  district  rather  than  the  pears  of 
another,  for  he  handles  both.  But  the  Exchange  agent 
handles  nothing  but  citrus  fruits;  he  can  talk  oranges  with- 
out having  to  consider  how  his  remarks  will  react  on  a 
consignment  of  apples  from  some  other  client.  He  is  on 
salary,  the  welfare  of  the  growers  is  his  welfare,  and  his 
reputation  and  advancement  hinge  exclusively  on  his  ability 
to  sell  citrus  fruits.  There  has  been  some  desultory  talk 
in  California  to  the  effect  that  great  savings  in  marketing 
could  be  made  if  the  citrus  growers  and  deciduous  growers 
and  vegetable  growers  w-ould  combine  and  let  the  same 
agents  handle  all  kinds  of  California  products. 

Such  a  policy  seems  subversive  of  all  the  marketing  ef- 
ficiency that  the  citrus  growers  have  so  painfully  developed. 
Is  it  conceivable  that  a  salaried  agent  could  please  two  sets 
of  producers  with  competing  crops?  If  the  Valencia  mar- 
ket happened  to  be  high  while  the  deciduous  market  w^as 
low,  as  occurred  in  the  summer  of  191 5,  how  could  an 
agent  escape  the  accusation  of  favoring  the  citrus  growers? 
This  combination  of  producers  might  be  feasible  if  the 
agents  worked  on  commission,  but  the  commission  system 
has  proved  itself  a  miserable  failure  in  working  out  a  scien- 
tific system  of  food  distribution.  Marketing  efficiency  de- 
mands singleness  of  interest  on  the  part  of  the  agent;  in 
other  words,  that  the  agent  be  given  some  real  incentive 
and  then  that  he  be  held  strictly  accountable  for  satisfactory 
service.  That  the  method  of  exclusive  salaried  agents  pro- 
motes efficient  salesmanship  Is  evidenced  by  the  fact  that 
Exchange  shipments  have  increased  some  1600  per  cent,  in 
the  past  twenty  years. 

All  of  the  Exchange  agents  keep  in  close  touch  with  their 
respective  division  managers,  reporting  daily  all  their  own 
sales  and  so   far  as  possible  keeping  informed  about  the 


174  COOPERATIVE    MARKETING 

movement  of  cars  belonging  to  non-exchange  shippers.  The 
marketing  operations  and  the  information  collected  by  the 
agents  are  classified  and  unified  each  day  at  the  division 
headquarters,  and  reports  of  everything  that  has  happened, 
together  with  the  outlook,  are  wired  daily  to  the  Los  An- 
geles office.  For  handling  its  elaborate  information  service 
the  Exchange  has  its  own  cipher  code,  and  its  expense  for 
telegrams  runs  into  thousands  of  dollars  a  month. 

The  other  part  of  the  marketing  system  which  is  located 
chiefly  outside  of  California  is  the  traffic  department.  This 
department,  with  headquarters  in  Los  Angeles,  maintains 
a  staff  of  inspectors  along  the  through  railroad  lines  and 
through  these  inspectors  watches  every  car  of  fruit  from 
the  original  shipping  point  to  the  final  destination.  The 
department  assists  in  the  routing  of  cars  so  as  to  allow 
a  shipper  to  lay  down  his  commodity  in  a  given  market  in 
the  very  shortest  time,  and  it  also  handles  diversions.  Its 
inspectors  see  to  it  that  cars  are  not  delayed  by  sidetracking, 
that  the  ventilation  or  icing  is  done  by  the  carriers  accord- 
ing to  specifications,  and  that  shifted  loads  are  rearranged. 
Fruit  that  shows  signs  of  decay  is  also  noted  by  the  in- 
spectors. Like  the  agents,  the  inspectors  report  daily  to 
the  Los  Angeles  office,  showing,  besides  the  condition  of 
the  fruit,  the  day  and  hour  of  arrival  and  departure  of 
every  car.  Hence  the  exact  location  of  each  car  is  always 
known  by  those  interested. 

Since  the  traffic  department  has  specific  and  complete 
data  from  its  own  agents,  it  knows  the  fact  as  soon  as  a 
car  has  been  mishandled  in  any  manner.  Claims  for  dam- 
ages against  the  carriers  are  a  part  of  the  department's 
duties,  and  the  marked  success  which  it  has  achieved  in 
collecting  claims  is  attributable  to  this  elaborate  system  of 
inspections.  The  railroads  now  realize  that  the  only  way 
of  escaping  the  payment  of  damages  is  to  render  a  service 


BENEFITS    OF    COOPERATION  175 

that  the  vigilant  traffic  department  cannot  criticize.  Such 
an  organization  as  the  Exchange  traffic  department  main- 
tains would  obviously  be  impossible  were  it  not  for  the 
immense  volume  of  fruit  handled.  As  it  is,  the  cost  is 
merely  nominal  while  the  benefits  are  among  the  most 
clearly  marked  which  the  cooperative  method  of  market- 
ing has  over  other  systems. 

Every  day  the  Los  Angeles  office  receives  the  reports 
from  agents  and  inspectors  all  over  the  country.  The  re- 
ports begin  to  come  in  during  the  early  morning,  and  those 
of  special  significance  that  require  immediate  action  may 
be  communicated  to  the  interested  associations  or  district 
exchange  managers  the  same  day.  Ordinarily,  however, 
these  various  reports  are  classified  as  they  arrive,  and  are 
tabulated  in  a  bulletin  which  is  mimeographed  and  sent  out 
from  Los  Angeles  on  the  early  morning  paper  trains.  Thus 
the  manager  of  each  association  and  district  exchange  finds 
on  his  desk  every  morning  a  complete  account  of  the  citrus 
situation  in  the  whole  of  the  United  States  and  Canada. 
He  is  told  how  many  cars  were  sold  the  day  before  and 
what  prices  they  commanded;  he  is  told  the  number  of 
cars  on  switch  and  rolling  and  also  the  location  and  con- 
dition of  the  moving  cars. 

The  system  employed  at  the  central  office  is  to  have  a 
separate  pigeonhole  for  history  cards  of  each  brand  shipped 
by  each  association,  the  cards  being  grouped  according  to 
the  district  exchanges.  In  the  office  of  each  district  ex- 
change, also,  similar  history  cards  are  filed  for  each  brand 
of  the  several  affiliated  associations.  Each  car  shipped  has 
its  own  card  which  sets  forth  every  item  of  interest  per- 
taining to  it,  such  as  the  date  of  shipment,  the  car  number, 
the  number  which  the  Exchange  gives  it,  the  number  of 
boxes  in  the  car,  the  varieties  and  sizes,  whether  the  car 
is  ventilated,  iced  or  pre-cooled,  to  what  city  it  is  billed  and 


176  COOPERATIVE    MARKETING 

by  what  routes.  Every  morning  the  history  of  the  car 
during  the  previous  day  is  available,  and  this  information 
is  immediately  transferred  to  that  car's  special  card.  The 
sales  managers  of  the  California  Fruit  Growers  Exchange 
can  know  at  a  glance  anything  they  wish  about  any  car  of 
the  entire  exchange  system.  And  at  the  busy  season  the 
exchange  has  rolling  or  on  track  toward  2,000  cars  a  day. 
Only  the  history  cards  for  the  cars  of  his  member  associa- 
tions are  kept  by  the  district  exchange  manager,  though 
the  information  for  all  the  cars  of  the  system  is  available 
in  the  bulletins,  and  a  manager  who  wants  to  know  the 
whereabouts  or  condition  or  prices  of  cars  of  competing 
managers  has  only  to  take  the  little  extra  time  necessary 
to  find  this  data  in  the  bulletins. 

The  Exchange  bulletin  appears  as  a  series  of  statements 
and,  taken  as  a  whole,  is  quite  a  complex  affair.  One  state- 
ment gives  all  the  exchange  shipments  from  California  for 
the  preceding  day,  including  all  the  points  that  have  been 
mentioned  as  appearing  on  the  history  cards.  Another 
statement  gives  all  of  the  telegrams  which  came  through 
the  central  exchange  during  the  preceding  day.  For  it 
must  be  remembered  that  the  California  Fruit  Growers 
Exchange  as  such  has  no  fruit  to  sell,  and  questions  about 
the  acceptance  or  rejection  of  prices,  the  consummation  of 
sales  and  the  conditions  of  markets  are  of  interest  only  to 
the  associations  and  district  exchanges  that  do  have  fruit 
to  sell.  But  agents  of  the  California  Fruit  Growers  Ex- 
change must  act  for  all  shippers,  hence  agents  are  not  al- 
lowed to  communicate  directly  with  associations  or  district 
exchanges,  but  must  send  all  their  messages  through  the 
central  exchange.  Then  these  messages  are  the  common 
property  of  all  exchange  members.  In  this  manner  agents 
are  effectually  precluded  from  showing  favoritism  to  any 
shipper,  a  thing  which  might  easily  happen,  and  one  certain 


BENEFITS    OF    COOPERATION  177 

to  be  charged,  if  agents  were  allowed  to  deal  directly  with 
associations  or  district  exchanges.  These  telegrams  tell 
of  offers,  the  condition  of  cars,  diversions  that  have  been 
made;  and  they  ask  for  instructions  on  various  matters. 
They  also  set  forth  the  demands  of  the  various  markets, 
as  to  quantities,  sizes,  and  varieties.  A  third  statement 
presents  a  tabulation  of  all  the  orange  sales  of  the  previous 
day,  together  with  the  prices  and  pertinent  remarks,  such 
as  the  amount  of  decay. 

Auction  markets  are  maintained  at  Boston,  New  York, 
Philadelphia,  Baltimore,  Pittsburgh,  Cleveland,  Cincinnati, 
St.  Louis  and  New  Orleans,  and  sales  at  these  places,  which 
amount  to  about  one-third  of  the  total  sales,  are  listed  sep- 
arately from  those  in  the  markets  of  the  private  agents. 
Another  statement  gives  this  same  information  in  regard 
to  lemons.  A  fifth  sheet  gives  a  bird's-eye  view  of  all  the 
cars  of  the  whole  system  that  are  rolling  or  on  track,  and 
another  document  presents  the  summaries  for  the  whole 
citrus  industry  of  California,  including  both  exchange  and 
non-exchange  shipments  for  the  preceding  day,  the  total 
cars  that  the  exchange  and  others  have  shipped  during  the 
whole  season,  and  how  these  totals  compare  with  totals  for 
the  same  day  during  previous  years.  In  addition  to  the 
daily  bulletin,  the  Exchange  prepares  weekly  and  monthly 
bulletins  which  summarize  those  items  of  information  which 
will  aid  an  association  or  district  exchange  manager  in  in- 
telligently regulating  his  shipments. 

This  market  information  service,  so  extraordinary'  among 
agricultural  industries,  means  the  difference  between  hap- 
hazard and  rational  distribution,  for  each  association  and 
district  exchange  manager  has  both  a  comprehensive  and 
detailed  view  not  only  of  his  own  shipments  but  of  all  ex- 
change shipments,  and  knows  the  conditions  and  demands 
not  merely  in  the  markets  to  which  he  has  shipped  but  in 


178  COOPERATIVE    MARKETING 

all.  With  this  extensive  information  before  him  the  man- 
ager takes  a  sweeping  survey  of  the  whole  field,  and  he  is 
enabled  to  maintain  a  correct  perspective  because  of  his 
comprehensive  view.  He  is  able  to  detect  all  the  places  in 
the  country  that  might  use  a  car  of  fruit  to  advantage, 
and  through  his  right  of  diversion  he  can  order  a  car  that 
he  may  have  rolling  to  be  diverted  and  the  demand  sup- 
plied. Thus  an  exchange  member  has  often  taken  advan- 
tage of  some  favorable  opening  before  outside  competitors, 
without  this  extensive  market  reporting  service,  are  even 
aware  that  one  has  occurred. 

"Competitive  cooperation"  has  been  most  responsible  for 
the  success  and  vitality  of  the  California  cooperative  sys- 
tem. It  cannot  be  too  often  emphasized  that  the  California 
Fruit  Growers  Exchange  makes  no  sales  on  its  own  ac- 
count, nor  does  it  even  direct  sales.  Sales  are  primarily 
the  function  of  the  managers  of  the  district  exchanges, 
more  or  less  in  consultation  with  the  association  managers. 
All  of  these  managers  are  continually  in  active  competition 
with  one  another.  Each  has  the  same  information  before 
him  at  the  same  time,  each  has  the  same  facilities  for  mar- 
keting, each  has  the  whole  of  the  United  States  and  Canada 
and  parts  of  Europe  at  his  field  of  operations,  each  is 
trying  to  obtain  the  highest  possible  price  for  his  product. 
Therefore,  assuming  the  equality  of  the  fruit  each  district 
manager  has  to  offer,  the  relative  marketing  success  of  the 
district  is  dependent  upon  the  business  acumen  of  the  man- 
ager. He  may  bill  a  car  to  a  certain  point  to  be  sold  by  the 
agent  there  at  a  specified  price,  or  he  may  decide  to  try  his 
fortunes  in  one  of  the  auction  markets.  However,  while  the 
car  is  en  route,  if  a  more  favorable  opportunity  arises  for 
placing  it  elsewhere  he  quickly  orders  it  to  be  diverted  and 
sent  to  reap  the  benefit  of  the  especially  favorable  opportu- 
nity.    But  he  must  remember  that  every  other  manager  is 


BENEFITS    OF    COOPERATION  179 

watching  for  exactly  the  same  chance  and  he  must  be  positive 
that  he  can  reach  the  particular  market  with  his  car  before 
any  other  manager  can  reach  it,  or  his  expected  advantage 
will  not  materialize.  The  skill  of  the  successful  manager 
consists  chiefly  in  his  ability  to  forecast  the  conditions  of 
the  various  markets  and  to  start  his  fruit  forward  so  that 
it  will  arrive  at  the  times  and  in  the  places  most  favorable 
for  satisfactory  prices. 

At  auction  points  sales  are  made  by  the  auction  company, 
and  there  is  no  chance  for  selling  strategy  by  the  district 
manager.  When  he  has  ordered  a  car  to  be  thrown  on  the 
auction  there  is  nothing  to  do  but  receive  what  it  brings, 
and  the  agent  of  the  California  Fruit  Growers  Exchange 
makes  no  sales,  but  simply  transmits  market  information 
and  attends  to  collections.  In  private  markets  agents  make 
the  sales,  but  they  can  do  nothing  except  on  the  orders  of 
the  shippers.  A  district  manager  may  order  an  agent  to 
sell  a  certain  car  at  not  less  than  a  specified  price,  to  sell 
it  for  what  it  will  bring,  or  to  obtain  offers  on  the  car  but 
not  to  sell  until  receiving  word  that  some  offer  is  satis- 
factory. If  no  satisfactory  bid  is  made  the  manager  may 
order  the  agent  to  hold  the  car  a  few  days  and  see  if  an 
acceptable  price  can  be  obtained,  or  he  may  order  the  car 
to  be  diverted  to  another  market  where  the  conditions  ap- 
pear to  be  more  favorable. 

The  third  important  method  of  selling  is  on  f .  o.  b.  order. 
There  are  many  jobbers  in  the  East  who  are  unwilling  to 
buy  any  fruit  that  happens  to  be  on  the  market  but  desire 
to  obtain  certain  brands  of  certain  associations  that  they 
have  found  especially  reliable.  So  these  jobbers  go  to  the 
agents  of  the  California  Fruit  Growers  Exchange  and  offer 
various  f.  o.  b.  prices  for  a  designated  quantity  of  specified 
sizes  to  be  delivered  at  an  agreed  time.  These  f.  o.  b. 
orders  are  transmitted  through  the  Exchange  mechanism, 


i8o  COOPERATIVE    MARKETING 

and  then  the  association  manager  fills  them  or  not  as  he 
sees  fit/  Of  course  the  f.  o.  b.  prices  offered  are  largely 
influenced  by  current  delivered  prices,  so  on  a  rising  mar- 
ket f.  o.  b.  orders  are  not  likely  to  return  as  much  money 
"to  the  shipper  as  if  he  had  forwarded  his  car  to  be  sold 
delivered,  while  on  a  falling  market  or  when  the  fruit  is 
not  exhibiting  good  shipping  qualities,  f.  o.  b.  orders  are 
eagerly  sought.  Some  regular  customers  are  usually  de- 
sired by  all  associations  as  a  kind  of  stabilizer,  so  that  some 
shipments  can  be  made  even  in  the  face  of  adverse  market- 
ing conditions.  These  customers  are  ordinarily  taken  care 
of,  though  their  orders  may  sometimes  not  be  very  attrac- 
tive. There  is  a  vast  difference  in  the  marketing  policy 
pursued  by  the  various  managers.  Some  believe  that  the 
largest  possible  proportion  of  sales  on  order  is  best,  some 
prefer  to  sell  principally  in  the  agents'  markets,  some  like 
to  entrust  their  fortunes  to  the  auctions. 

From  the  foregoing  account  the  reader  might  conclude 
that  the  district  manager  is  practically  supreme  in  the  sale 
bf  carloads.  Such  a  conclusion  would  be  erroneous.  It  is 
true  that  many  associations  delegate  to  the  district  manager 
control  over  sales,  but  many  others  do  not,  or  do  so  only 
in  part.  All  offers,  outside  of  auctions,  may  have  to  be 
referred  to  the  association  manager  for  his  approval,  or 
the  association  manager  may  empower  the  district  manager 
to  sell  specified  cars  at  his  discretion.  There  are  so  many 
reasons  why  the  association  manager  should  and  so  many 
iwhy  he  should  not  try  to  control  sales  that  no  categorical 
answer  can  be  given  to  this  much  mooted  question.  It  is 
the  old  problem  of  the  greatest  advantage  of  one  unit  of 
an  industry  versus  the  greatest  advantage  of  the  industry 
as  a  whole.  With  certain  reservations,  however,  the  evi- 
dence seems  to  point  toward  a  relatively  large  authority 
on  the  part  of  the  district  manager. 


BENEFITS    OF    COOPERATION  i8i 

It  is  the  duty  of  the  district  manager  to  advise  his  asso- 
ciations about  the  most  advantageous  times  and  places  to 
ship,  and  about  the  varieties  and  sizes  in  demand;  also  to 
emphasize  the  necessity  of  regular  and  prolonged  distribu- 
tion as  the  only  basis  of  scientific  marketing.  He  must 
show  the  association  managers  that  undue  delay  in  ship- 
ments leads  only  to  such  a  disastrous  slump  as  occurred  at 
the  close  of  the  1908-09  season.  Yet  in  every  fruit  year 
there  are  periods  which  average  much  higher  than  others, 
and  naturally  each  association  manager  wants  to  serve  his 
growers  by  having  his  own  shipments  heavy  in  the  strong 
markets  and  light  in  the  weak  markets.  Nevertheless, 
yielding  to  this  temptation  leads  to  the  old  time  speculative, 
chaotic  shipments  in  place  of  the  present  system  of  sta- 
bilized shipments  on  a  merchandizing  basis. 

Though  the  district  exchanges  do  and  should  exercise 
a  directive  influence  over  the  associations,  the  California 
Fruit  Growers  Exchange,  neither  through  its  manager  and 
its  agents  nor  in  any  other  manner  attempts  to  control 
shipments  or  prices.  The  central  exchange  and  its  repre- 
sentatives do  their  full  duty  when  they  carry  out  the  orders 
of  the  shippers  efficiently  and  furnish  the  information  that 
makes  it  possible  for  the  orders  to  be  rational.  If  all  of 
the  shippers  should  forward  their  whole  output  on  a  given 
day  to  the  agent,  say,  at  Chicago  with  orders  to  sell  for 
what  he  could  get  for  the  cars,  he  could  do  nothing  but 
comply,  though  undoubtedly  his  daily  reports  on  the  mar- 
keting outlook  at  Chicago  would  be  gloomy.  However, 
it  is  to  avoid  such  contingencies  as  the  one  suggested  that 
the  market  reporting  service  through  agents  and  inspectors 
has  been  developed.  Each  manager  knows  the  whereabouts 
of  every  exchange  car  and  to  what  market  it  is  billed;  hence 
so  far  as  the  exchange  itself  is  concerned,  distribution  may 
be  almost  completely  regularized. 


i82  COOPERATIVE    MARKETING 

But  the  so-called  independent  shipper  has  little  scientific 
control  over  his  marketing.  He  may  decide  to  ship  a  car 
to  a  certain  market,  but  he  does  not  know  how  many  other 
shippers  may  decide  the  same  day  to  bill  cars  to  the  same 
market.  Neither  can  he  keep  in  very  close  touch  with  his 
car  while  it  is  rolling,  or  handle  diversions  very  skillfully. 
Almost  literally  he  sends  his  product  out  into  the  world 
with  the  naive  hope  that  it  will  be  treated  with  forbearance 
and  consideration. 

Within  the  exchange  system  there  is  absolutely  no  at- 
tempt to  stifle  competition,  divide  marketing  territory  or 
gain  other  advantages  through  underhand  methods.  All 
of  the  fruit  grown  by  the  members  must  be  sold,  and  the 
sole  purpose  of  the  entire  cooperative  system  is  simply  to 
distribute  it  in  such  a  manner  that  it  will  bring  the  most 
money  to  the  growers.  But  marketing  policy  is  controlled 
not  by  one  central  body,  but  by  seventeen  district  exchanges, 
117  local  associations  and  fourteen  contract  shippers,  who 
represent  8,000  growers.  Every  local  and  every  district 
manager  is  trying  to  build  up  the  reputation  of  his  own 
organization,  and  is  trying  to  secure  his  own  advantage 
in  all  markets,  although  by  so  doing  he  may  be  involving 
some  fellow  manager  in  difficulty  or  loss.  Prices  are  not 
fixed  in  any  manner  except  by  the  demands  of  the  market. 
Each  car  sells  on  its  own  merits,  and  there  is  no  attempt 
to  secure  a  uniform  price  for  all  brands  of  the  same  grade 
from  different  houses. 

The  price  is  a  resultant  of  the  quantity  of  fruit  on  any 
particular  market  and  the  attractiveness  of  that  fruit.  At 
one  time  poor  fruit  may  sell  for  more  than  good  fruit  does 
at  another,  but  at  any  specified  time  on  a  given  market  cars 
command  prices  according  to  quality.  Thus  superiority 
is  encouraged  and  inferiority  is  penalized,  for  shippers 
whose  output  is  known  to  be  of  high  quality  and  good 


BENEFITS    OF    COOPERATION  183 

keeping  characteristics  are  certain  to  receive  the  preference 
over  their  less  competent  or  less  fortunately  located  com- 
petitors. In  providing  the  marketing  facilities  and  handling 
the  problems  that  concern  the  business  as  a  whole  there  is 
highly  organized  and  effective  cooperation  within  the  citrus 
industry,  but  in  the  distribution  and  selling  of  the  crop 
there  is  unrestricted  freedom  of  competition.  That  is  the 
reason  the  exchange  has  been  described  as  a  system  of 
competitive  cooperation. 

This  competitive  cooperation  keeps  the  whole  exchange 
system  in  a  vigorous  and  healthy  condition.  Each  grower 
is  striving  to  surpass  his  fellows  as  to  quantity  and  quality 
of  fruit;  each  association  manager  is  trying  to  organize 
his  picking  and  packing  facilities  to  the  best  advantage  and 
so  to  distribute  his  shipments  that  they  will  yield  the  high- 
est returns;  each  district  exchange  manager  is  working  to 
make  a  better  marketing  record  than  that  shown  by  any 
other  manager;  the  management  of  the  California  Fruit 
Growers  Exchange  and  its  various  departments,  inspectors 
and  agents  are  always  bending  their  energies  toward  fur- 
nishing a  more  efficient  marketing  medium  than  that  avail- 
able to  any  non-exchange  shippers. 

To  throw  into  relief  the  whole  system  of  cooperative 
marketing  as  developed  in  the  citrus  industry,  let  us  follow 
a  car  of  fruit  from  grove  to  jobber  when  it  is  handled  in 
the  typical  way.  (Almost  any  of  the  operations  might  be 
performed  in  a  different  manner.)  The  process  is  some- 
what as  follows :  The  association  manager,  through  at- 
tending the  weekly  meetings  of  the  California  Fruit 
Growers  Exchange,  through  conferences  with  the  district 
exchange  manager,  and  through  his  own  observations  of 
the  course  of  the  markets,  becomes  convinced  that  his  asso- 
ciation should  ship  a  certain  percentage  of  its  estimated 
crop  during  a  specified  time.     So  at  the  meeting  of   his 


1 84  COOPERATIVE    MARKETING 

directors  he  recommends  that  a  pool  of  a  certain  size  be 
declared  for  that  time.  After  deliberation  the  directors 
accept  or  modify  his  plan,  and  declare,  say,  an  April  pool 
of  15  per  cent.  Then  the  association  manager  informs 
each  grower  that  the  picking  gang  will  be  on  hand  at  a 
designated  time  to  pick  15  per  cent,  of  his  fruit.  The 
grower  distributes  the  picking  boxes  and  hauls  his  fruit  to 
the  packing  house  as  it  is  picked.  Here  it  is  brushed, 
graded,  weighed,  packed,  pre-cooled  and  loaded  on  the  car 
which  has  been  ordered  and  placed  by  the  manager  of  the 
district  exchange. 

At  this  point  the  direct  responsibility  for  the  car  is  shifted 
from  the  association  to  the  district  manager.  The  latter 
bills  the  car  in  the  name  of  the  district  exchange  to  the 
agent  of  the  California  Fruit  Growers  Exchange  at,  for 
example,  Chicago.  Each  day  the  inspectors  along  the  line 
apprise  the  district  manager,  through  the  bulletin  of  the 
central  exchange,  of  the  whereabouts  and  condition  of  the 
car.  The  manager  is  also  getting  daily  market  reports, 
and  as  the  car  nears  its  destination  he  finds  that  the  Chicago 
market  is  highly  unfavorable.  He  also  learns  that  the 
condition  of  the  car  is  such  that  it  needs  to  be  pushed  into 
immediate  consumption.  So  he  orders  the  agent  at  Chicago 
to  divert  it  only  as  far  as  to  the  agent  at  Detroit  where  the 
market  appears  to  be  stronger,  though  the  market  at  Provi- 
dence is  even  higher,  and  if  the  fruit  had  shown  little  decay 
it  would  have  been  ordered  there.  He  instructs  the  agent 
at  Detroit  to  sell  it  at  not  less  than  a  certain  price  and  if 
this  much  is  not  offered  to  report  the  best  bid  and  await 
further  directions.  If  the  acceptable  price  is  forthcoming 
the  agent  makes  the  sale  and  reports  the  fact  through  the 
central  Los  Angeles  office.  If  no  satisfactory  offer  occurs 
the  manager  either  lowers  his  price  until  the  car  will  be 
taken,  or  he  rediverts  it  to  yet  another  market  where  the 
same  process  is  repeated. 


BENEFITS    OF    COOPERATION  185 

In  all  of  these  selling  negotiations  the  district  manager 
is  in  more  or  less  close  consultation  with  the  manager  of 
the  association  which  owns  the  car.  When  the  sale  is  con- 
summated, the  agent  immediately  collects  the  proceeds  and 
forwards  the  entire  amount  directly  to  the  district  exchange. 
The  district  exchange  retains  a  fixed  sum  a  box  to  cover 
its  ow^n  expenses  and  those  of  the  California  Fruit  Growers 
Exchange  and  forwards  the  rest  to  the  association,  and  at 
the  close  of  the  pool  the  growers  receive  their  due  shares 
according  to  the  manner  already  described. 

From  the  nature  of  its  business,  dealing  as  it  does  in 
commodities  of  interstate  commerce  and  having  relations 
with  transportation  companies  of  all  kinds,  the  exchange 
system  is  constantly  confronted  with  technical  legal  ques- 
tions. For  handling  these  the  contract  provides  for  the 
creation  of  a  legal  department.  It  is  the  duty  of  this  de- 
partment to  see  that  the  exchange  conforms  to  all  national 
and  state  statutes  concerning  interstate  commerce,  rela- 
tions to  labor,  taxation,  and  similar  matters.  The  depart- 
ment also  handles  trademark  infringements  and  stands 
prepared  to  render  legal  advice  to  any  association  or  dis- 
trict exchange.  As  much  of  the  work  of  this  department 
is  carried  on  in  connection  with  the  Citrus  Protective 
League,  further  comment  will  be  deferred  until  that  or- 
ganization is  described. 

It  is  not  particularly  difficult  to  construct  an  elaborate 
selling  mechanism.  Indeed  the  chief  defect  of  our  present 
system  of  food  distribution  is  that  it  is  too  elaborate.  From 
the  foregoing  account  of  the  selling  organization  of  the 
California  Fruit  Growers  Exchange  one  might  wonder 
whether  any  simplification  has  in  reality  been  effected 
through  cooperation  and  whether  the  profits  of  the  industry 
are  not  largely  dissipated  in  supporting  a  top-heavy  and 
expensive  marketing  service.     "How  much  does  it  cost" 


i86  COOPERATIVE    MARKETING 

is  always  a  pertinent  question,  and  if  the  California  co- 
operative system  cannot  make  a  satisfactory  showing  in 
this  regard  it  must  stand  condemned.  The  old  line  packers 
and  shippers  charged  about  35  cents  a  box  for  marketing 
and  guaranteeing  collections.  For  the  same  service,  and 
in  addition  for  the  incalculable  benefit  from  the  informa- 
tion that  the  old  line  shippers  could  not  possibly  obtain,  the 
claims  they  could  not  possibly  collect,  and  the  advertising 
they  could  not  possibly  carry  on,  the  costs  of  the  central 
exchange  to  its  members  have  been : 

Total  Cost  per  Packed  Box  for  Conducting  the  California  Fruit 
Growers  Exchange,  1904-05  to  1915-16.3 

1904-5 $0,045 

1905-6 068 

1906-7 052 

1907-8 054 

1908-9 053 

1909-10 061 

1910-11 065 

1911-12 075 

1912-13 073 

1913-14 057 

1914-15 062 

1915-16 074 

Average 0616 

This  marketing  cost  of  approximately  six  cents  a  box 
represents  some  2.5  per  cent,  on  gross  sales.  To  obtain 
the  total  cost  of  marketing,  the  expenses  of  the  district 
(exchange  must  be  added.  As  these  amount  to  slightly  less 
than  one  cent  a  packed  box,  the  total  cost  of  selling  Cali- 
fornia citrus  fruits  through  the  exchange  system  is  about 
seven  cents  a  box,  or  somewhat  less  than  3  per  cent,  on  gross 
sales.  Such  a  showing  is  extremely  commendable  when 
it  is  remembered  that  10  per  cent,  on  gross  sales  is  no  un- 
usual selling  cost  for  agricultural  products. 

^  Figures  compiled  from  the  Annual  Reports  of  the  General  Man- 
ager of  the  California  Fruit  Growers  Exchange. 


BENEFITS    OF    COOPERATION  187 

Another  criterion  of  success  is  permanent  popularity. 
Since  withdrawal  from  the  exchange  system  is  compara- 
tively easy  and  involves  no  great  expense,  satisfaction 
among  the  members  with  regard  to  the  results  of  coopera- 
tion is  the  only  possible  explanation  of  a  constant  or  in- 
creasing membership.  Orange  growers  can  easily  ascertain 
how  members  of  the  exchange  have  fared,  and  non-mem- 
bers would  certainly  have  no  reason  for  joining  unless  it 
appeared  that  they  could  receive  more  benefits  within  the 
organization  than  they  had  been  receiving  through  othef 
marketing  media.  How  attractive,  therefore,  has  the  ex- 
change system  of  cooperative  selling  appeared  to  growers 
of  citrus  fruits,  considered  as  a  whole? 

Growth   of  the  Californi.^   Fruit  Growers  Exchange, 
1904-5  to  1915-16.* 

Per  cent,  of  total 
California 

Boxes  shipped                 F.o.b.  crop  shipped 

by  Exchange.                 returns.  by  Exchange. 

1904-5 5,189,000                   $  7,124,000  47 

1905-6 4,706,000                       9,936,000  47 

1906-7 6,150,000                      12,269,000  -             55 

1907-8 6,629,000                      11,754,000  56 

1908-9 8,711,000                      13,959,000  59 

1909-10 7,579,000                      14,832,000  59 

1910-11 10,843,000                     20,708,000  61 

1911-12 9,191,000                     16,891,000  61 

1912-13 4,900,000                      13,500,000  61.5 

1913-14 11,262,000                      19,247,000  62 

1914-15 11,890,000                     19,574,000  62.5 

1915-16 12,102,000                     27,703,000  67 

Such  a  record  of  continuous  and  undramatic  growth  is 
the  strongest  evidence  that  those  in  the  best  position  to 
judge  as  to  the  merits  of  this  particular  system  of  coopera- 
tion believe  in  it  and  support  it. 

*  Figures  compiled   from  the  Annual  Reports  of  the  General   Man- 
ager of  the  California  Fruit  Growers  Exchange. 


i88  COOPERATIVE    MARKETING 

It  is  evident,  therefore,  that  the  exchange  system  has 
accompHshed  the  purposes  for  which  it  was  organized. 
Marketing  expenses  all  along  the  line  have  been  reduced, 
distribution  has  been  equalized,  and  consumption  of  citrus 
fruit  enormously  expanded.  Based  on  achievements,  only 
one  verdict  is  possible  in  passing  judgment  on  the  ex- 
change system. 


CHAPTER  XI 

AFFILIATED   COOPERATIVE  ORGANIZATIONS   IN   THE 

CITRUS  INDUSTRY 

The  existence  of  one  organization  connected  with  the 
exchange  system  is  partly  adventitious.  To  pack  its  enor- 
mous output  of  citrus  fruits  the  exchange  required  im- 
mense quantities  of  box  shooks.  These  shocks  had  been 
furnished  by  the  various  kmiber  companies  at  thirteen  cents 
a  box.  But  after  the  San  Francisco  fire  in  1906  kimber 
was  in  great  demand,  and  the  companies  served  notice  that 
the  price  of  box  materials  would  be  advanced  to  twenty- 
one  cents.  On  packing  boxes  alone  this  advance  repre- 
sented an  increased  cost  to  the  exchange  of  some  $800,000 
annually.  Almost  all  of  the  pine  box  manufacturers  were 
represented  by  one  selling  agency  to  which  buyers  of  shooks 
were  compelled  to  turn,  and  consequently  prospects  of  re- 
lief for  the  associations  seemed  quite  remote. 

After  an  attempt  to  supply  their  needs  through  other 
channels  than  the  pine  box  agency  had  met  with  only  in- 
different success,  various  conferences  were  held  for  the 
purpose  of  devising  some  escape  from  exploitation  by  the 
lumber  manufacturers.  Here  again  the  advantages  of  an 
organized  industry  were  apparent.  Up  to  the  time  of  the 
rise  in  the  prices  of  box  shooks  each  association  had  pur- 
chased its  packing  supplies  without  reference  to  the  policies 
of  other  associations,  whether  members  or  non-members 
of  the  exchange  system.  As  soon  as  trouble  arose,  how- 
ever, nothing  was  more  natural  than  to  turn  to  the  cen- 
tral organization  as  the  most  likely  means  of  escape  from 

189 


iQO  COOPERATIVE    MARKETING 

the  impending  difficulties.  The  various  associations  soon 
became  convinced  that  a  purchasing  agency,  composed  of 
all  the  associations  within  the  exchange,  was  the  only  pos- 
sible way  to  break  the  power  of  the  box  combination. 

So  in  1907  the  Fruit  Growers  Supply  Company  was 
organized.  The  officers  and  directors  of  the  corporation 
are  the  same  as  those  of  the  California  Fruit  Growers  Ex- 
change, with  the  reservation  that  the  Supply  Company  has 
its  own  manager.  In  its  capitalization  the  Supply  Company 
is  extraordinary.  Instead  of  selling  stocks  and  bonds,  its 
capital  was  furnished  by  an  agreement  among  the  associa- 
tions to  deduct  three  cents  from  each  box  shipped  for  five 
years,  and  turn  the  proceeds  over  to  the  new  company. 
Then  shares  of  $10  each  were  to  be  issued  to  the  associa- 
tions in  proportion  to  their  contributions.  With  the  capital 
thus  secured,  the  Supply  Company  began  to  render  financial 
aid  to  small  box  manufacturers  who  had  not  joined  the 
selling  agency  and  who  agreed  to  furnish  shooks  at  thir- 
teen and  one-half  cents.  As  soon  as  this  policy  was  in- 
augurated the  large  manufacturers  tried  to  disrupt  the  new 
organization  by  offering  boxes  at  eleven  cents,  in  very  much 
the  same  manner  that  packers  and  shippers  attempted  to 
frustrate  the  early  efforts  toward  cooperation  in  marketing 
by  offering  members  more  for  their  fruit  than  they  were 
likely  to  get  if  they  shipped  through  the  exchange.  In  both 
instances  the  attempts  came  to  naught,  because  the  growers 
had  had  all  the  experience  they  cared  for  with  speculative 
shippers  or  exploitative  box  manufacturers. 

By  1 9 10  the  Supply  Company  was  on  a  sufficiently  firm 
financial  basis  to  justify  broadening  its  scope  of  operations. 
Though  independent  box  factories  were  furnishing  shooks 
at  a  reasonable  price,  there  was  no  assurance  that  they 
would  not  at  some  time  join  the  selling  agency  and  place 
the  citrus  growers  in  a  very  embarrassing  predicament.     So 


AFFILIATED    ORGANIZATIONS  191 

the  Supply  Company  determined  to  put  itself  in  an  inde- 
pendent position.  It  bought  a  considerable  tract  of  timber 
land  in  northern  California  and  erected  a  lumber  mill 
capable  of  supplying  about  half  of  the  packing  box  needs 
of  the  exchange  members.  With  this  means  of  protecting 
itself  the  Supply  Company  is  in  a  most  strategic  position 
for  bargaining  with  shook  manufacturers. 

Thus  far  the  policy  of  the  Supply  Company  has  been  to 
buy  most  of  its  shooks  from  the  regular  dealers  and  only 
operate  its  own  plant  enough  to  know  that  in  case  of  emer- 
gency everything  is  in  readiness  to  afford  prompt  and  ade- 
quate relief.  Under  these  conditions  box  manufacturers 
can  charge  only  what  the  Supply  Company  regards  as  a 
reasonable  price  for  shooks,  else  it  will  increase  its  plant 
and  care  for  its  needs  without  reference  to  the  regular 
dealers.  Since  there  can  be  but  one  market  price  for 
shooks,  the  benefits  from  this  action  on  the  part  of  the 
Supply  Company  accrue  to  all  citrus  fruit  packers  as  well 
as  exchange  members. 

Besides  packing  boxes  the  Supply  Company  furnishes 
its  members  with  other  necessary  packing  materials,  such 
as  nails,  labels,  tissue  wraps,  strapping,  curtains,  etc.  These 
things  it  buys  from  the  trade  at  much  more  favorable  dis- 
counts than  individual  packing  houses  could  get. 

Packing  house  materials  represent  only  one  side  of  the 
Supply  Company's  activities :  the  other  is  devoted  to  ob- 
taining orchard  materials  for  the  members  of  the  associa- 
tions. Growers  buy  each  year  large  quantities  of  fertilizers, 
seed  for  cover  crops,  frost  protection  devices  and  fumiga- 
tion supplies,  such  as  sodium  cyanide  and  sulphuric  acid. 
All  of  these  things  are  obtained  through  the  Supply  Com- 
pany at  greatly  reduced  prices.  Members  of  the  associa- 
tions do  not  deal  directly  with  the  Fruit  Growers  Supply 
Company  but  turn  in  their  orders  to  their  local  association 


192  COOPERATIVE    MARKETING 

managers,  who  forward  the  orders  to  the  Supply  Company. 
Payment  for  orchard  materials  is  also  made  through  the 
agency  of  the  associations. 

It  appears  from  the  foregoing  that  the  Supply  Company 
does  not  solicit  business  and  does  not  attempt  to  do  a  gen- 
eral retail  business.  It  simply  acts  as  the  purchasing  agent 
for  associations  and  growers  for  a  limited  variety  of  ma- 
terials that  are  used  in  large  quantities.  By  massing  the 
orders  of  all  exchange  members,  much  better  bargains  can 
be  made  with  the  trade  than  if  these  orders  were  scattered. 
Until  recently  the  policy  of  the  Supply  Company  has  been 
to  resell  materials  to  associations  and  growers  at  cost  plus 
the  actual  expense  of  transacting  the  business  and  a  sum 
that  would  afford  a  dividend  of  6  per  cent,  on  the  capital 
stock.  But  such  a  policy  was  very  distasteful  to  whole- 
salers and  retailers,  because  they  often  had  to  lower  their 
prices  to  meet  the  quotations  of  the  Supply  Company,  and 
as  the  latter  was  operating  at  cost  no  profit  was  left  to 
legitimate  dealers.  Besides,  this  plan  took  away  the  ap- 
parent advantage  of  dealing  through  the  Supply  Company. 
So  the  method  gradually  being  adopted  is  to  sell  to  mem- 
bers at  market  prices  and  make  a  refund  at  the  close  of  the 
season  of  all  money  saved  to  members  through  the  ad- 
vantageous bargaining  position  of  the  Supply  Company. 

An  additional  advantage  of  this  procedure  is  that  the 
benefits  of  cooperation  are  far  more  evident  to  the  average 
grower  or  association  manager  when  he  receives  a  check 
for  a  substantial  lump  sum  and  realizes  it  represents  what 
he  has  saved  through  cooperation.  His  actual  savings  are 
as  great  if  he  gets  his  supplies  at  cost  rather  than  at 
market  price  or  if  he  receives  his  supplies  at  market  price 
and  gets  a  monthly  or  quarterly  refund,  but  an  annual  re- 
fund is  unquestionably  the  best  method  of  assuring  his 
enthusiasm  for  and  loyalty  to  the  principle  of  the  coopera- 
tive purchase  of  supplies. 


AFFILIATED    ORGANIZATIONS  193 

The  original  authorized  capital  of  the  Supply  Company 
was  $1,000,000.  But  the  stipulated  contributions  of  the 
associations  which  agreed  to  go  into  the  new  venture  finally 
exceeded  the  authorized  capital.  As  more  capital  could 
be  profitably  employed  the  capitalization  was  recently  in- 
creased to  $1,500,000.  Of  the  associations  which  are  mem- 
bers of  the  exchange  system  all  but  seven  have  joined  the 
Supply  Company,  and  receive  its  benefits.  Also  about  seven 
non-exchange  shippers  have  been  permitted  to  take  stock. 
A  dividend  of  6  per  cent,  on  the  capital  is  provided  for, 
and  this  money  is  distributed  among  the  associations  accord- 
ing to  stock  holdings.  Within  the  associations  each  mem- 
ber is  credited  on  the  books  of  the  association  with  Supply 
Company  stock  in  proportion  to  the  number  of  boxes  of 
fruit  he  has  shipped  from  which  a  deduction  has  been  made 
to  furnish  funds  for  the  Supply  Company. 

For  example,  if  some  grower  furnished  5,000  packed 
boxes,  and  the  assessment  for  Supply  Company  stock  for 
that  year  was  three  cents  a  box,  that  grower  would  be 
credited  with  owning  fifteen  shares  of  Supply  Company 
stock  and  would  be  paid  his  regular  dividend  on  that  basis. 
When  dividends  on  stock  have  been  paid,  all  surplus  moneys 
beyond  a  small  amount  usually  set  aside  for  contingencies 
are  refunded  to  the  associations  in  proportion  to  the  busi- 
ness transacted  with  the  company.  The  refund  to  the  asso- 
ciations on  packing  house  supplies  is  often  credited  to 
general  packing  expenses,  but  the  refund  on  orchard  ma- 
terials is  now  very  frequently,  and  should  be.  distributed 
only  among  members  who  have  patronized  the  company, 
and  in  proportion  to  the  size  of  their  orders.  Formerly 
this  refund  was  distributed  among  nicml)crs  according  to 
stock  ownership. 

That  the  Supply  Company  is  an  important  element  in 
the  citrus  growers'  cooperative  system  is  evidenced  by  the 


194  COOPERATIVE    MARKETING 

fact  that  in  19 14- 15  it  transacted  more  than  $4,000,000 
worth  of  business  for  its  members.  This  sum  was  divided 
into  $2,450,000  for  packing  house  supplies,  $840,000  for 
orchard  materials  and  $770,000  worth  of  lumber  and  other 
goods  sold  on  the  open  market  in  connection  with  the  com- 
pany's lumbering  operations.  Some  14,500  orders  were 
handled  by  the  company  at  a  cost  for  operation  of  sixty- 
eight  and  one-half  cents  on  each  $100  worth  of  business, 
or  about  two-thirds  of  i  per  cent.  Such  economy  of  opera- 
tion is  one  of  the  most  commendable  features  of  this  par- 
ticular organization. 

To  make  more  vivid  the  large  business  conducted  by  the 
Supply  Company  for  associations  and  growers,  a  few  of 
the  items  handled  by  it  in  1914-15  might  be  listed  as 
follows  :^ 

^  Figures  from  Annual  Reports  of  the  Manager  of  the  Fruit  Growers 
Supply  Co.,  1914-15. 

Box  shocks   12,054,000  boxes         2190  carloads 

Tissue  wraps  2,802,380,000  247       "        (est.) 

Nails   16,450  kegs  50       " 

Sodium  cyanide....  1,750,000  pounds  58       " 

Sulphuric  acid 2,870,000  pounds 

Fertilizers    26,200  tons  (1913-14) 

The  Fruit  Growers  Supply  Company  therefore  is  an  im- 
portant and  successful  factor  in  the  cooperative  system  of 
the  citrus  fruit  growers.  Probably  the  company's  claim 
that  packing  house  and  orchard  materials  cost  the  growers 
$1,000,000  less  annually  than  if  it  were  not  in  existence  is 
not  ill  founded.^ 

~  A  rather  highly  colored  account  of  the  Fruit  Growers  Supply  Co. 
may  be  found  in  the  Country  Gentleman,  May  29,  1915,  entitled  "Buy- 
ing for  Sellers,"  by  Walter  V.  Woehlke.  Ch.  IX  of  Powell's  "Co- 
operation in  Agriculture,"  entitled  "Cooperation  in  the  Purchase  of 
Supplies,"  quite  evidently  refers  to  the  Fruit  Growers  Supply  Co., 
though  no  names  are  mentioned.  This  treatment  is  quite  satisfactory. 
However,  the  description  by  the  present  writer  has  been  written 
wholly  from  first  hand   information. 


AFFILIATED    ORGANIZATIONS  195 

The  investment  of  the  exchange  associations  in  packing 
houses  and  equipment  amounts  to  a  considerable  sum.  This 
property  offers  an  opportunity  for  an  extension  of  coopera- 
tion in  the  shape  of  mutual  insurance  against  loss  by  fire. 
Consequently,  under  the  general  control  of  the  board  of 
directors  of  the  California  Fruit  Growers  Exchange,  there 
has  been  drawn  up  a  Mutual  Indemnity  Compact  whose 
provisions  about  100  of  the  associations  have  accepted. 
This  agreement  follows  the  usual  plans  for  mutual  insur- 
ance against  damage  from  fire.  Subscribers  are  rated  ac- 
cording to  the  value  of  the  property  and  the  character  of 
the  hazard,  and  in  case  of  loss  incurred  by  any  member 
all  of  the  subscribers,  including  the  one  suffering  the  loss, 
agree  to  contribute  toward  the  indemnification  of  the  in- 
jured party.  The  contribution  from  each  member  is  as- 
sessed according  to  the  ratio  which  that  member's  insured 
property  bears  to  the  total  value  of  the  property  insured. 
Rates  at  which  each  member  is  assessed  for  losses  and  for 
funds  to  carry  on  the  machinery  of  the  compact  vary  ac- 
cording to  a  point  system,  being  proportionately  more  as 
the  risks  are  greater,  and  less  as  the  character  of  the  build- 
ing and  the  available  fire  fighting  apparatus  warrant.  Con- 
siderable attention  is  devoted  to  the  practice  of  "sweating," 
and  the  rules  are  quite  specific  as  to  what  may  or  may  not 
be  done.  This  is  proper,  for  by  far  the  most  likely  cause 
of  fire  is  in  connection  with  the  sweat  room. 

Packing  houses  and  machinery  may  be  insured  at  four- 
fifths  of  their  value,  provided  that  the  total  liability  under 
the  compact  does  not  exceed  $25,000.  Regular  inspections 
are  carried  on  under  the  immediate  direction  of  the  cashier's 
department  of  the  California  Fruit  Growers  Exchange. 
Since  little  machinery  is  necessary  for  these  insurance 
operations  in  addition  to  that  already  provided  for  by  the 
California  Fruit  Growers  Exchange,  the  expenses  of  ad- 


196  COOPERATIVE    MARKETING 

ministration  are  small.  y\.t  present  the  lOO  member  asso- 
ciations are  carrying  approximately  $1,500,000  worth  of 
insurance.  No  losses  from  fire  have  occurred  for  two 
years,  and  those  supervising  the  insurance  features  of  the 
exchange  system  estimate  that  members  save  about  half 
of  the  money  which  they  would  have  to  pay  for  insurance 
in  the  regular  companies.^ 

f  Another  affiliated  cooperative  organization,  but  one  which 
is  as  yet  in  the  formative  stage,  is  the  Exchange  By- 
products Company.  )  In  general  its  organization  is  similar 
to  that  of  the  Supply  Company.  Its  capital  at  present  is 
but  $100,000,  and  it  has  only  completed  the  preliminary 
arrangements  for  the  erection  of  a  plant  at  Corona. 
Though  there  is  nothing  that  can  be  said  about  the  achieve- 
ments of  this  cooperative  enterprise,  its  prospects  are 
bright.  In  Italy  by-products  represent  about  one-third  of 
the  value  of  citrus  exports,*  while  in  the  United  States  the 
by-product  field  is  almost  untouched. 

Citrus  by-products  are  chiefly  composed  of  the  essential 
oils,  citric  acid  and  citrate  of  lime,  the  bottled  juices  and 
the  preserved  or  candied  peel.  Essential  oils  are  obtained 
from  citrus  fruits  by  peeling  them  by  mechanical  devices, 
crushing  the  peel  and  recovering  the  oil  by  centrifugal  and 
mechanical  processes.  These  oils  are  chiefly  found  on  the 
market  in  the  form  of  flavoring  extracts  of  orange  or  lemon 
and  as  perfumery.  Such  oils  are  worth  somewhat  over 
$1  a  pound.  Citric  acid  and  citrate  of  lime  are  obtained 
by  crushing  the  peeled  lemon  in  order  to  extract  the  juice, 
by  subjecting  the  juice  to  various  heat  processes,  adding 
chalk  to  obtain  citrate  of  lime  and  dissolving  with  sulphuric 
acid  in  order  to  get  citric  acid.    About  fifty  pounds  of  acid, 

3  Letter  to  the  writer  from  the  Cashier  of  the  California  Fruit 
Growers  Exchange,  dated  Januar}'  15,  1916. 

*  Citrus  Protective  League :     Bulletin  No.  il,  p.  40. 


AFFILIATED    ORGANIZATIONS  197 

worth  to  the  manufacturers  fifty  cents  a  pound,  can  be 
obtained  from  one  ton  of  lemons.  These  products  are 
chiefly  used  in  connection  with  the  manufacture  of  leather 
and  the  printing  of  cloth.  The  Citrus  Protective  League 
calculates  that  almost  one-third  of  the  Sicilian  lemon  crop 
is  manufactured  into  citrate  of  lime.''  Incidentally,  it  is 
estimated  that  enough  sodium  and  potassium  cyanide  can 
be  obtained  from  the  pulp  after  the  juice  is  extracted  to 
supply  the  growers'  needs  for  the  purposes  of  fumigation. 
No  comment  about  the  bottled  juices  is  necessary,  except 
to  mention  that  the  use  of  orange  juice  as  a  beverage  is 
rapidly  increasing.  The  uses  of  the  candied  peel  and  mar- 
malade are  also  obvious. 

Ultimately  the  By-Products  Company  expects  to  manu- 
facture all  of  these  commodities,  but  at  first  it  will  devote 
attention  to  the  essential  oils  and  citric  acid.  For  these 
products  the  raw  material  is  lemons.  In  fact,  as  yet  the 
uses  that  can  be  made  of  small  and  off  grade  oranges  are 
extremely  limited.  This  situation  is  not  serious,  as  there 
is  at  present  much  more  need  for  an  outlet  for  superfluous 
lemons.  The  orange  market  can  be  enlarged  by  a  con- 
structive marketing  policy,  but  the  lemon  market  is  quite 
rigid.  Comparatively  small  additional  supplies  above  the 
normal  consumption  make  prices  fall  until  the  lemons  will 
not  cover  costs. 

It  is  just  this  situation  that  the  Exchange  By-Products 
Company  is  organized  to  meet.  When  the  market  is  firm 
all  merchantable  fruit  will  be  shipped,  and  only  the  culls 
will  be  turned  into  by-products.  But  when  market  prices 
become  unremunerative  the  very  small  and  the  coarse  fruit 
will  not  be  shipped.  Such  a  policy  will  tend  to  improve 
the  market  both  by  reducing  the  supplies  available  to  dealers 
and  by  improving  the  average  quality  of  the  stocks  that 

5  Citrus  Protective  League;     Bulletin  No.  ii,  p.  2>i- 


198  COOPERATIVE    MARKETING 

are  offered.  Under  the  old  plan,  though  every  shipper 
knew  that  at  certain  times  the  only  way  to  save  the  market 
from  demoralization  was  to  reduce  shipments,  yet  no  single 
shipper  was  likely  to  send  his  fruit  to  the  dump  for  the 
sake  of  improving  the  lemon  market,  since  by  his  very 
action  he  would  be  excluded  from  participating  in  the  bene- 
fits which  he  had  helped  to  produce.  As  long  as  there  was 
any  likelihood  of  paying  anything  above  freight,  packing 
and  selling  charges,  shippers  were  going  to  send  forward 
as  many  lemons  as  possible.  Undoubtedly  this  was  a  short 
sighted  policy,  but  under  the  conditions  as  they  formerly 
existed  no  other  was  possible. 

Unless  some  kind  of  an  agreement  could  have  been 
worked  out  by  which  shippers  would  reduce  their  output 
by  a  definite  percentage  when  the  market  was  overstocked, 
gluts  were  inevitable.  Moreover,  such  an  agreement  would 
unquestionably  have  been  illegal.  However,  as  soon  as  the 
By-Products  Company  gets  into  operation,  associations  will 
only  market  lemons  as  long  as  the  price  is  more  than  enough 
to  counterbalance  what  can  be  made  by  turning  the  fruit 
into  by-products.  For  example,  in  the  winter  when  the 
demand  for  lemons  is  slight,  some  return  can  be  had  on 
the  fruit  without  shipping  it.  Thus  the  company  is  in- 
tended to  be  a  kind  of  safety  valve.  It  is  expected  to 
stabilize  the  market  and  prevent  those  shortages  and  gluts 
which  are  almost  equally  injurious  for  growers  and  for 
dealers.  With  an  efficient  by-products  plant  available  the 
disastrous  season  of  1914-15  could  not  have  occurred.  This 
new  departure  in  cooperation  should  prove  interesting,  as 
there  are  possibilities  of  wide  development.  It  also  should 
prove  most  beneficial  to  the  citrus  industry. 

An  important  factor  in  the  California  cooperative  system 
is  the  Citrus  Protective  League.  It  was  the  first  organiza- 
tion of  its  kind  in  the  United  States;  it  concerns  itself  with 


AFFILIATED    ORGANIZATIONS  199 

vital  problems  which  in  most  agricultural  industries  are 
left  to  chance.  The  league  was  organized  in  1906  to  handle 
all  of  the  public  policy  questions  which  relate  to  the  industry 
as  a  whole.  Such  questions  are  control  over  the  routing 
of  fruit,  transportation  and  refrigeration  chrages,  pre- 
cooling  problems,  customs  tariffs,  national  and  State  regu- 
latory legislation,  orchard  and  packing  problems;  in  short, 
any  general  questions  relating  to  the  upbuilding  of  the  citrus 
industry  fall  within  the  province  of  the  League.  Member- 
ship is  voluntary,  and  "all  growers,  organizations  of  grow- 
ers, or  shippers  of  citrus  fruits  are  eligible."  Expenses  are 
met  by  assessing  each  member  according  to  the  number  of 
cars  of  fruit  shipped  by  each  during  the  preceding  fruit 
year,  but  no  single  assessment  may  exceed  the  rate  of 
twenty-five  cents  a  car. 

The  business  of  the  league  is  directed  by  an  executive 
committee  of  nine  members  who  are  chosen  from  an  ad- 
ministrative committee  of  thirty  members.  This  latter 
committee  is  supposed  to  represent  all  of  the  large  citrus 
interests  of  the  State.  Withdrawal  from  the  league  is 
possible  at  any  time,  but  the  fact  that  shippers  representing 
about  90  per  cent,  of  the  citrus  fruit  volume  are  members 
clearly  indicates  that  the  citrus  industry  believes  the  league 
to  be  worth  while.  The  California  Fruit  Growers  Ex- 
change, representing  67  per  cent,  of  the  citrus  shipments, 
is  a  member,  as  are  the  Mutual  Orange  Distributors,  who 
handle  about  14  per  cent,  of  the  crop  and  are  by  far  the 
largest  cooperative  organization  handling  citrus  fruits,  if 
exception  is  made  of  the  California  Fruit  Growers  Ex- 
change. In  addition,  the  most  important  grower-shippers 
are  members.  Since  there  are  included  as  members  of  the 
league  shippers  with  all  kinds  of  marketing  policies,  it  is 
definitely  specifcd  in  the  membership  agreement  that  the 
league  shall  conduct  its  functions  "without  reference  to 
the  various  methods  of  marketing." 


200  COOPERATIVE    MARKETING 

If  the  league  were  not  in  existence,  of  course  the  only 
organization  that  could  cope  with  the  more  general  public 
iaspects  of  the  citrus  business  would  be  the  California  Fruit 
Growers  Exchange.  But  since  advantages  in  the  form  of 
lower  freight  rates,  better  accommodations,  or  similar  mat- 
ters accrued  to  the  entire  industry  as  well  as  to  the  mem- 
bers of  the  exchange,  it  was  admitted  that  the  entire  burden 
of  securing  improvements  could  not  rightfully  be  shifted 
to  the  exchange  alone.  To  be  sure,  the  small  minority  of 
growers  and  shippers  who  refuse  or  neglect  to  join  the 
league  announce  by  their  actions  that  they  are  interested 
in  secured  benefits  rather  than  in  securing  benefits.  Even 
in  a  highly  organized  industry  where  cooperation  and  public- 
spiritedness  are  the  keynotes,  such  anachronisms  of  selfish- 
ness are  probably  inevitable. 

In  a  recent  statement  the  league  thus  describes  its  ac- 
complishments : 

The  Citrus  Protective  League,  in  the  eight  years  that  it 
has  been  organized,  has  been  the  instrument  by  which  the 
citrus  fruit  growers  of  California  have  been  enabled  to  ac- 
complish certain  definite  benefits  to  themselves  which  it 
would  have  been  impossible  for  individual  growers  or  mar- 
keting organizations  to  obtain.  The  results  have  been  ac- 
complished through  the  voluntary  cooperation  of  its  mem- 
bers who  have  given  their  time  and  experience  without 
charge  in  order  that  the  industry  as  a  whole  might  benefit. 

It  then  enumerates  as  its  achievements  the  reduction  in 
1907  of  the  freight  rate  on  oranges  from  $1.25  to  $1.15 
a  hundred  pounds,  which  saves  the  industry  about  $1,000,- 
000  in  a  normal  year;  a  change  in  the  refrigeration  tariff 
in  1909  which  nets  to  the  industry  about  $50,000  a  year; 
the  successful  litigation  of  the  lemon  rate  case  by  which 
the  carriers  were  restrained  from  increasing  the  freight 
rate  on  lemons  from  $1  to  $1.15  a  hundred  pounds.  This 
case  was  in  constant  litigation  from  1909  to  191 3,  when 


AFFILIATED    ORGANIZATIONS  201 

the  Supreme  Court  of  the  United  States  rendered  a  verdict 
in  favor  of  the  lemon  industry.  This  service  of  the  league 
represents  a  normal  annual  gain  of  $250,000  to  the  grow- 
ers. The  league  also  handled  the  pre-cooling  and  pre-icing 
litigation  and  secured  additional  significant  savings  to  the 
shippers  of  oranges  and  lemons. 

The  league  was  largely  responsible  for  having  the  tariff 
on  lemons  raised  by  the  Payne- Aldrich  Act  from  one  cent 
to  one  and  one-half  cents  a  pound.  Probably  its  activities 
in  191 3  kept  lemons  from  being  placed  on  the  free  list,  and 
left  them  with  a  duty  of  one-half  cent  a  pound  in  the 
Underwood  Act.  Through  the  efforts  of  the  league  the 
Federal  authorities  have  specified  acceptable  standards  for 
the  shipment  of  frosted  and  immature  fruit.  In  1909,  when 
the  citrus  industry  was  threatened  by  the  infestation  of  the 
white  fly,  the  league  furnishd  funds  for  its  eradication  at 
a  time  when  the  State  authorities  had  no  funds  available. 
Later,  however,  the  league  was  reimbursed.  In  191 1  the 
league  induced  the  United  States  Department  of  Agri- 
culture to  undertake  a  thorough  study  of  the  causes  of 
decay  in  oranges  and  to  establish  a  laboratory  for  the  ex- 
perimental study  of  citrus  by-products. 

To  the  league's  credit  can  be  placed  much  of  the  interest 
in  and  application  of  frost  protection  devices.  Many  grow- 
ers who  saved  their  crops  by  heating  appliances  in  the  frost 
of  19 1 3  were  induced  to  make  the  necessary  preparations 
because  of  the  league's  propaganda.  One  of  its  most  sig- 
nificant accomplishments  was  its  important  part  in  inducing 
the  California  Legislature  to  authorize  a  branch  of  the 
University  of  California,  College  of  Agriculture,  for  ihe 
study  of  and  investigation  into  citrus  problems,  such  as  soil 
and  nutrition  problems,  insect  pests  and  citrus  diseases. 
A  new  experiment  station  has  recently  been  established  at 
Riverside  and  bids  fair  to  take  a  leading  jiart  in  the  future 
lipbuilding  of  the  industry. 


202  COOPERATIVE    MARKETING 

Besides  these  public  activities,  the  league  publishes  fre- 
quent bulletins  of  information  to  keep  its  members  fully 
conversant  with  the  latest  improvements  in  citrus  technique. 
It  also  gathers  statistics  of  the  citrus  industry  in  all  parts 
of  the  world,  keeps  a  citrus  reference  library,  and  main- 
tains a  bureau  of  information  available  to  any  one  inter- 
ested in  the  citrus  industry.  To  secure  all  of  these  benefits 
that  have  been  enumerated  the  members  have  had  to  pay 
but  sixty  cents  a  car  a  year,  or  one  and  one-half  mills  a 
box.  Freight  savings  alone  have  amounted  to  7.2  cents 
a  box  for  oranges  and  12.6  cents  for  lemons.* 

Probably  no  one  would  contend  that  the  achievements 
mentioned  could  possibly  have  taken  place  without  organiza- 
tion. It  is  difficult  to  imagine,  for  example,  how  an  indi- 
vidual farmer  would  proceed  toward  securing  reduced 
freight  rates  or  obtaining  an  agricultural  college.  On  the 
other  hand,  is  a  Dakota  farmer  likely  to  know  the  statistics 
and  conditions  of  wheat  production  in  Russia?  But  the 
citrus  grower  has  definite  information  about  conditions  in 
Italy  and  in  all  other  countries  where  citrus  fruits  are  pro- 
duced. An  unorganized  industry  makes  haphazard  prog- 
ress, as  some  one  happens  to  stumble  upon  an  improvement 
in  methods.  But  the  citrus  industry  through  its  complete 
organization  can  command  the  expert  services  of  Federal 
and  State  officials  to  solve  problems  of  whose  existence  the 
ordinary  grower  is  hardly  aware.  Organization  is  the  clue 
to  the  rapid  changes  that  are  constantly  taking  place  in  the 
citrus  industry  as  contrasted  with  the  placid  conservatism 
of  most  agricultural  enterprises.  Ancestor  worship  and  de- 
votion to  the  archaic  are  not  characteristics  of  real  coopera- 
tion. For  united  and  aggressive  attacks  on  common 
problems  are  bound  to  yield  definite  results,  and  close  asso- 

s  Data   taken   from   a   statement   of   the   Citrus   Protective   League, 
dated  May  21,  1914. 


AFFILIATED    ORGANIZATIONS  203 

elation  is  bound  to  disseminate  these  results  throughout  the 
whole  organization. 

What  power  the  league  can  bring  to  bear  on  general 
citrus  problems  may  be  thrown  into  stronger  light  by 
tracing  briefly  the  history  of  the  lemon  rate  case  and  the 
pre-cooling  case.  In  1909,  after  the  tariff  on  lemons  was 
advanced  from  one  to  one  and  one-half  cents  a  pound,  the 
railroads  responded  by  announcing  an  advance  in  freight 
charges  on  lemons  from  $1  to  $1.15  a  hundred  pounds.  Cit- 
rus fruits  from  California  have  long  enjoyed  a  blanket  or 
"postage  stamp"  rate  to  all  the  principal  markets  east  of  the 
Rocky  Mountains :  that  is,  the  rate  to  Kansas  City  and  to 
Boston  is  identical.  So  an  advance  in  rates  was  a  serious 
matter.  Therefore  the  Citrus  Protective  League  in  connec- 
tion with  the  legal  department  of  the  California  Fruit  Grow- 
ers Exchange  entered  a  petition,  in  the  name  of  one  of  the 
district  exchanges  of  the  exchange  system,  in  the  Circuit 
Court  for  the  Southern  District  of  California  asking  that  the 
new  rate  should  not  be  permitted  to  take  effect  until  the  rea- 
sonableness of  the  increase  had  been  submitted  to  the  Inter- 
state Commerce  Commission.  The  injunction  was  granted 
in  November,  1909,  and  at  a  hearing  the  commission  de- 
cided in  June,  19 10,  that  the  rate  should  not  exceed  $1  a 
hundred  pounds.  Thereupon,  in  October,  1910,  the  car- 
riers filed  a  joint  bill  of  complaint  in  the  Circuit  Court  fox 
the  First  District  of  Kansas,  alleging  that  the  commission's 
order  was  null  and  void  on  the  grounds  both  that  the  com- 
mission had  exceeded  its  legal  authority  and  that  the  rate 
of  $1  was  confiscatory.  An  injunction  against  putting  the 
commission's  order  into  operation  was  granted,  and  the 
case  was  transferred  to  the  newly  established  United  States 
Commerce  Court. 

Another  extensive  hearing  was  held,  this  time  before  the 
Commerce  Court,   with  the  result  that   in   October,    1911, 


204  COOPERATIVE    MARKETING 

the  commission's  order  was  declared  ultra  vires,  and  there- 
fore null  and  void.  But  the  court  also  said  that  it  was 
without  prejudice  to  a  reopening  and  reconsideration  of 
the  entire  question  by  the  Interstate  Commerce  Commission. 
Accordingly  this  was  done,  and  again  thousands  of  pages 
of  testimony  were  taken,  and  again  the  commission  de- 
clared, in  December,  191 1,  that  the  rate  of  $1.15  for  lemons 
was  unreasonable  and  that  the  rate  should  not  exceed  $1. 
Once  more  the  carriers  applied  to  the  Commerce  Court  for 
relief,  but  after  a  fourth  hearing  the  Commission's  order 
was  sustained  by  the  court  in  February,  1913.  The  rail- 
roads then  appealed  the  case  to  the  Supreme  Court  of  the 
United  States,  which  rendered  a  decision  favorable  to  the 
growers  in  November,  1913.^ 

This  lemon  rate  case  is  probably  the  most  striking  ex- 
ample on  record  of  the  power  that  can  be  wielded  by  an  or- 
ganized agricultural  industry,  against  outside  encroachments. 
For  it  should  be  noted  that  the  citrus  growers  entered  their 
complaint  against  practically  all  of  the  railroads  of  the 
United  States,  and  especially  against  the  Southern  Pacific, 
Santa  Fe  and  Salt  Lake  systems,  roads  well  able  to  protect 
their  own  interests.  Each  party  backed  its  contentions  by 
enormous  amounts  of  evidence.  No  individual  growers  or 
even  small  organizations  could  have  borne  the  financial 
pressure  of  the  litigation,  or  secured  the  evidence  which 
finally  resulted  in  success.  For  an  organized  industry,  rep- 
resenting almost  $200,000,000  worth  of  property,  such  con- 
tests become  practicable.     Moreover,  adverse  interests  are 

^  The  citations  for  the  legal  stages  in  connection  with  the  Lemon 
Rate  Case,  in  the  order  in  which  they  are  mentioned  in  the  text,  are: 
Arlington  Heights  Fmit  Exchange  v.  Southern  Pacific  Co.,  175  Fed. 
141;  Arlington  Heights  v.  Southern  Pacific,  19  I.  C.  C.  148;  Atchison, 
Topeka  &  Santa  Fe  v.  Interstate  Commerce  Commission,  182  Fed.  189; 
A.  T.  &  S.  F.  V.  I.  C.  C,  190  Fed.  591,  i  Com.  Ct.  83;  Arlington 
Heights  V.  Southern  Pacific,  22  I.  C.  C.  149;  A.  T.  &  S.  F.  v.  U.  S., 
203  Fed.  56;  A.  T.  &  S.  F.  v.  U.  S.,  231  U.  S.  736. 


AFFILIATED    ORGANIZATIONS  205 

not  likely  to  impose  on  such  an  industry  and  thus  provoke 
a  test  of  strength. 

But  little  less  tortuous  has  been  the  history  of  the  pre- 
cooling  and  pre-icing  case.  In  order  to  escape  part  of  the 
heavy  refrigeration  charges  ($62.50  a  car  to  Chicago,  $75 
to  New  York)  of  the  carriers  and  also  to  improve  the  re- 
frigeration methods  the  shippers  began,  about  1908,  the 
practice  of  pre-cooling.  That  is,  the  fruit  was  thoroughly 
chilled  before  it  was  loaded  on  the  cars.  Also  the  bunkers 
were  filled  with  ice  by  the  shippers  and  the  carriers  were 
ordered  not  to  re-ice  in  transit,  while  formerly  the  initial 
icing  and  the  necessary  re-icings  had  been  furnished  by 
the  car  companies.®  Hence  the  railroads  performed  no 
service  for  the  shippers  except  to  furnish  the  cars  and  haul 
the  freight.  These  two  items,  so  the  shippers  contended, 
were  part  of  the  transportation  service  covered  by  the  reg- 
ular freight  tariffs,  and  no  charge  whatever  for  refrigera- 
tion services  w-as  justifiable,  as  the  shippers  had  furnished 
all  of  the  refrigeration  themselves.  But  the  railroads  in- 
sisted on  charging  an  arbitrary  rate  of  $30  per  car  on  ship- 
ments that  had  been  pre-cooled  and  pre-iced  by  the  shippers. 
It  was  from  this  charge  of  $30  a  car  that  the  shippers 
sought  relief  through  the  courts. 

As  soon  as  the  Interstate  Commerce  Commission  ordered 
the  railroads  not  to  charge  more  than  $7.50  a  car  on  pre- 
cooled  and  pre-iced  shipments,  the  carriers  revoked  the 
right  of  the  shippers  to  pre-cool  and  pre-ice.  This  case 
also  was  twice  before  the  commission,  twice  before  the 
Commerce  Court,  and  it  was  finally  decided,  in  January. 
1914,  by  the  Supreme  Court  of  the  United  States  both 
that  the  shippers  had  the  right  to  pre-cool  and  prc-ice  and 

8  All  of  the  refrigeration  business  of  the  Southern  Pacific  and  Salt 
Lake  Companies  is  handled  by  the  California  Fruit  Express  Co. ;  that 
of  the  Santa  Fe  system,  by  the  Santa  Fe  Refrigerator  Despatch  Co. 
Both  of  these  companies  are  completely  controlled  by  the  railroads. 


2o6  COOPERATIVE    MARKETING 

that  the  carriers  should  not  charge  more  than  $7.50  a  car 
for  refrigeration  on  such  shipments. 

Thus  the  exchange  system  controls  a  Supply  Company 
to  provide  packing  house  and  orchard  materials  for  its 
members,  an  Indemnity  Compact  to  insure  its  associations' 
packing  houses  against  fire,  a  By-Products  Company  to 
relieve  the  market  of  unattractive  or  unwanted  fruit,  and 
it  is  by  far  the  most  important  member  of  the  Citrus  Pro- 
tective League  which  is  vigilantly  alert  to  see  that  the  citrus 
growers'  interests  are  maintained  and  where  possible  ex- 
tended. In  short,  cooperative  activity  characterizes  almost 
every  branch  of  the  citrus  business  except  the  actual  pro- 
duction of  fruit,  and  even  there  cooperative  picking  crews, 
cooperative  irrigation  systems,  cooperative  fumigating  out- 
fits and  cooperative  frost  protection  associations  are  com- 
mon. The  growers  have  amply  demonstrated  that  by 
working  together,  instead  of  against  one  another,  a  highly 
specialized  industry,  thousands  of  miles  from  its  principal 
markets,  with  enormous  fixed  charges,  not  only  can  exist 
but  can  prosper. 


CHAPTER  XII 

RELATION  OF  EXCHANGE  SYSTEM  TO  GENERAL 
MARKETING  PROBLEM 

The  cooperative  activities  of  the  Cahfornia  citrus  growers 
are  not  vitally  important,  but  the  significance  of  their  activ- 
ities is  of  far  reaching  importance.  It  has  been  with  the 
purpose  of  estimating  the  relation  of  the  California  system 
to  the  broad  problems  of  food  distribution  that  the  earlier 
chapters  have  been  written.  If  the  system  of  cooperation 
worked  out  by  the  citrus  growers  has  no  wider  application 
than  to  the  citrus  industry,  it  is  little  more  than  an  in- 
dustrial curiosity. 

From  the  detailed  attention  that  has  been  devoted  to  the 
structure  of  the  California  Fruit  Growers  Exchange  it 
might  be  inferred  that  no  other  systems  of  cooperation 
are  in  vogue  among  the  citrus  growers  of  California.  Such 
a  conclusion  would  be  erroneous.  Coit  classifies  the  mar- 
keting arrangements  as  follows  :^ 

Sales  through  the  California  Fruit  Growers 

Exchange   62  per  cent. 

Independent  association  sales 20       " 

Sales  by  independent  growers  who  ship  to 

market  5       " 

Miscellaneous  sales   13       " 

The  procedure  for  the  20  per  cent,  marketed  by  the  in- 
dependent cooperative  associations  is  roughly  analogous  to 
that  described  in  connection  with  the  exchange  system,  with 
the  exception  that  far  less  elaborate  and  comprehensive 
machinery  is  employed.     Also  these  associations  often  con- 

^Coit:     "Citrus  Fruits,"  p.  3.^. 

207 


2o8  COOPERATIVE    MARKETING 

sign  to  brokers,  a  thing  that  the  exchange  never  does.  How- 
ever, it  is  ahnost  accurate  to  say  with  Mr.  Powell  that  "to 
be  as  near  like  the  exchange  system  as  possible  is  the  lead- 
ing argumentative  asset  of  every  important  independent 
association  that  seeks  to  build  up  a  larger  membership  in 
the  citrus  industry." 

There  are  a  few  growers  with  a  large  acreage  who  have 
packing  houses  of  their  own,  and  are  not  merely  members 
of  associations  of  growers.  Some  of  these  large  growers 
have  established  reputations  with  the  trade  which  put  them 
in  an  exceptional  marketing  position,  and  they  do  not  feel 
the  need  of  associating  themselves  with  other  producers  for 
the  purpose  of  solving  the  marketing  problems. 

The  13  per  cent,  listed  as  miscellaneous  sales  represents 
that  small  group  of  growers  who  have  as  yet  been  unin- 
fluenced by  cooperation.  These  growers  still  market 
through  speculative  buyers  in  practically  the  same  manner 
as  before  the  opening  of  the  cooperative  era.  They  sell  by 
the  pound  all  the  fruit  they  can  to  buyers  and  consign  the 
remainder  on  commission. 

So  the  question  naturally  arises :  If  the  California  Fruit 
Growers  Exchange  has  achieved  such  signal  success,  why 
do  these  outside  interests  refuse  to  affiliate  themselves  with 
it?  The  answer  to  this  question  goes  to  the  heart  of  the 
problem  of  cooperative  effort.  Why,  therefore,  did  some 
growers  organize  cooperative  enterprises  of  their  own  in- 
istead  of  joining  the  exchange  system?  And  w^hy  do  some 
growers  continue  to  hold  aloof  from  cooperation  alto- 
gether? Unfortunately  for  the  believers  in  the  principles 
of  cooperation,  these  questions  cannot  be  lightly  brushed 
aside  as  irrelevant,  and  honest  answers  to  them  strike  at 
the  foundation  itself  of  cooperative  endeavor  in  the  field 
of  agricultural  industry. 

If  the  exchange  system  employed  monopolistic  tactics, 


THE  EXCHANGE  AND  THE  MARKET  209 

if  it  tried  to  restrict  or  discourage  the  planting  of  new  citrus 
acreage  or  limit  membership  or  control  shipments,  there 
would  be  adequate  reason  on  the  part  of  non-members  for 
hesitating  to  join,  but  it  should  be  abundantly  clear  from 
the  foregoing  description  of  the  exchange's  methods  that 
no  such  practices  are  countenanced.  Very  few  growers 
who  understand  the  system  base  their  objections  on  this 
ground,  although  some  more  or  less  interested  parties  have 
at  times  tried  to  sound  the  "trust"  alarm.  Growers  know 
that  they  are  at  liberty  to  join,  in  fact,  that  their  member- 
ship is  desired;  and  they  know  that  they  will  have  a  voice 
in  directing  the  policy  of  their  association  according  to  their 
relative  importance  as  growers.  They  also  realize  that  were 
it  not  for  the  stabilizing  effect  of  the  exchange  on  the  mar- 
ket they  very  probably  could  not  produce  profitably  at  all. 
Many  non-members  admit  that  with  no  exchange  the  citrus 
industry  would  be  a  puny  affair. 

Yet  they  refuse  to  become  members  and  take  their  part 
in  maintaining  the  organization  which  they  acknowledge 
is  indispensable  to  their  welfare.  The  reason  is  that  the 
benefits  from  many  of  the  public  policy  activities  of  the 
exchange  and  the  advantages  of  a  regularized  market  accrue 
almost  equally  to  members  and  non-memljers.  The  same 
dilemma  confronts  the  exchange  system  that  confronts  the 
dominant  organization  in  any  industrial  field.  It  realizes 
that  judicious  distribution  of  fruit,  extended  as  long  in  time 
and  as  widely  in  space  as  possible,  is  the  only  means  of  sell- 
ing the  constantly  and  rapidly  augmenting  citrus  croj).  No 
other  organization  is  in  a  position  to  take  the  lead  in  this 
rational,  scientific  marketing  program.  If  the  whole  in- 
dustry would  fall  into  line  and  support  these  efforts  toward 
regular  distribution,  the  marketing  problem  would  be 
solved  satisfactorily. 

This  does  not  imply  that  citrus  fruits  could  always  be 


2IO  COOPERATIVE    MARKETING 

sold  at  a  profit,  for  that  depends  on  the  whole  economic 
situation.  It  does,  however,  mean  that  a  grower  would 
receive  his  equitable  share  of  what  consumers  of  citrus 
fruits  generally  estimated  that  such  fruits  as  compared  to 
other  commodities  were  worth  to  them.  Accident  and 
chance  and  speculation  would  largely  be  removed  from  the 
business  of  marketing.  Depressed  prices  in  one  market 
and,  at  the  same  time,  inflated  prices  in  another  would  be- 
come impossible.  Prices  would  fluctuate  from  month  to 
month  during  the  citrus  year  according  as  the  sales  man- 
agers accurately  or  inaccurately  anticipated  the  demands 
of  the  market.  If  a  wrong  calculation  occurred  and  too 
large  a  percentage  of  the  crop  should  be  forwarded  during 
the  first  part  of  the  season,  prices  would  obviously  be  lower 
during  that  part  and  higher  during  the  latter  part  of  the 
season.  Also  from  year  to  year  prices  would  vary  accord- 
ing to  the  size  of  the  citrus  crop  and  competing  crops  and 
according  to  the  condition  of  business  in  general. 

The  point  here  urged  is  simply  that  fluctuations  in  price 
at  any  given  time  due  to  irregular  distribution  in  space 
could  be  eliminated.  In  other  words,  a  satisfactory  system 
of  food  distribution  should  widen  the  meaning  of  the  term 
market  until  it  corresponds  with  the  financial  market,  in 
which  the  market,  where  one  price  governs,  is  practically 
synonymous  with  the  entire  country.  At  present,  the  mar- 
ket for  fresh  food  products  is  rarely  of  wider  extent  than 
the  municipality.  Prices  in  one  city  have  only  a  remote 
relation  to  those  in  another,  and  unorganized  distribution 
cannot  be  other  than  fortuitous.  It  is  submitted  that  com- 
plete organization  combined  with  an  extensive  market  in- 
formation service  would  remedy  this  situation. 

Under  the  present  arrangements,  without  complete  or- 
ganization in  the  citrus  industry,  there  are  large  differences 
in  the  price  of  fruit  in  different  cities  and  in  different  seasons 


THE  EXCHANGE  AND  THE  MARKET  211 

of  the  year.  The  exchange  system  has  greatly  reduced 
these  variations,  but  they  still  persist,  and  are  the  very  fac- 
tors that  are  likely  to  make  complete  unification  of  the  dis- 
tributing machinery  impossible.  At  certain  times  and  in 
certain  places  especially  attractive  prices  are  anticipated) 
so  at  such  times  the  independent  shippers  rush  their  cars 
to  those  places  to  reap  the  exceptional  rewards.  The  ex- 
change, through  its  information  service,  realizes  even  more 
fully  than  the  independent  shippers  that  these  opportunities 
exist,  but  it  also  realizes  that  outside  shipments  are  certain 
to  be  on  hand  and  that  additional  offerings  of  its  own  fruit 
would  make  the  market  collapse.  H  the  exchange  had  the 
inclination  it  could  ruin  these  non-cooperating  shippers  by 
throwing  its  own  cars  in  excessive  numbers  on  all  the  prin- 
cipal markets.  For  the  independent  shippers  have  no 
choice  but  to  ship  to  the  large  markets,  as  they  do  not  have 
the  machinery  for  knowing  the  demands  of  the  smaller 
cities.  But  such  a  policy  of  aggressive  competition  would 
involve  a  temporary  loss  for  exchange  shippers  as  well  as 
the  discomfiture  of  their  competitors,  and,  since  each  ex- 
change shipper  has  absolute  control  of  his  own  shipments 
and  is  guided  in  his  marketing  policy  only  by  an  intelligent 
and  comprehensive  view  of  general  marketing  conditions, 
no  shipper  is  likely  to  adopt  cutthroat  tactics. 

Thus  non-exchange  shippers  have  the  advantage  of  the 
large  markets  while  the  exchange  has  to  go  out  and  work 
up  the  smaller  markets.  Also  at  the  large  centres  a  short- 
age of  fruit  is  felt  much  more  quickly  and  raises  prices 
much  more  abruptly  than  in  the  smaller  places.  Hence, 
independent  shippers  are  often  in  a  position  to  reap  scarcity 
profits.  In  short,  non-exchange  shippers  arc  in  a  position 
to  gain  most  of  the  advantages  of  a  stabilized  and  expanded 
market  without  contributing  toward  the  work  of  stabiliza- 
tion or  expansion.     To  the  extent  that  this  is  true,  the  ex- 


212  COOPERATIVE    MARKETING 

change  member  is  penalized  for  his  progressiveness.  The 
case  is  quite  analogous  to  the  condition  of  the  non-union 
workman  who  gladly  accepts  the  increased  wages,  the  short- 
ened hours,  and  the  improved  working  conditions  that  have 
been  fought  for  and  won  by  the  unions  but  who  declines  to 
bear  his  brunt  of  the  fight. 

If  taken  to  task  some  of  these  independent  shippers  would 
confess  that  without  the  steadying  effect  of  the  exchange 
the  citrus  industry  of  California  could  not  possibly  have 
reached  its  present  dimensions,  and  might  not  have  existed 
at  all.  If  the  exchange  showed  any  signs  of  collapsing  they 
would  rush  to  its  support,  but  meanwhile  they  are  quite 
content  to  "ride  without  paying."  But  the  exchange  cannot 
adopt  this  irresponsible  philosophy.  Its  very  life  depends 
on  systematic  marketing.  With  the  reversion  to  spasmodic 
marketing  the  exchange  itself,  because  of  its  enormous 
shipments,  would  be  the  worst  sufferer. 

The  final  straw  to  the  exchange  member's  patience,  and 
the  one  that  is  responsible  for  most  desertions  from  the 
system,  is  the  fact  that  the  independent  shipper  with  h!^ 
chaotic  methods  sometimes  obtains  higher  prices,  even  after 
the  exchange  member  has  gone  to  the  trouble  and  expense 
of  building  up  his  elaborate  marketing  machinery.  When 
non-exchange  shipments  bring  better  prices,  exchange  mem- 
bers at  once  learn  the  fact  through  the  citrus  market  reports 
of  the  daily  papers,  and  indeed  independent  shippers  nat- 
urally try  to  make  capital  out  of  these  successes  by  bringing 
them  to  the  attention  of  both  their  own  and  exchange  ship- 
pers. To  be  sure,  these  particularly  high  prices  often  do 
not  apply  to  entire  car  lot  sales,  but  to  a  few  boxes  of  ex- 
ceptionally fine  fruit  within  a  car,  while  exchange  sales  al- 
most invariably  denote  the  average  price  a  box  obtained 
for  the  whole  car.  But  the  psychological  effect  of  the  high 
quotations  is  just  as  disastrous  as  if  these  few  exceptional 
sales  did  have  some  real  significance. 


THE  EXCHANGE  AND  THE  MARKET  213 

These  exceptional  sales  are  always  noted  and  discussed 
when  many  sales  of  independents  which  average  lower  than 
exchange  sales  are  unnoticed.  Because  of  its  policy  of  even 
and  regular  distribution,  exchange  sales  are  apt  to  conform 
more  closely  to  the  general  average  of  prices  at  any  specified 
time,  while  non-exchange  shippers  are  likely  to  receive  both 
the  highest  and  the  lowest  prices. 

The  important  point  is  that  non-exchange  shippers  often 
have  the  advantage  of  being  able  to  report  spectacular 
prices.  And  since  it  seems  to  be  a  characteristic  of  human 
nature  to  prefer  the  chance  of  securing  exceptionally  large 
gains,  though  incurring  the  risk  also  of  exceptionally  large 
losses,  to  more  moderate  gains  and  less  risk,  even  when 
moderate  gains  can  be  proved  to  total  more  than  large  gains 
plus  large  losses,  some  people  are  going  to  choose  specula- 
tive instead  of  merchandising  methods  of  marketing.  Co- 
operative marketing  on  a  large  scale  is  not  a  spectacle,  it 
is  a  business.  Extraordinary  prices  could  only  be  obtained 
by  manipulating  shipments  so  as  to  bring  about  scarcity 
prices,  and  the  attempt  to  do  this  would  be  the  direct  an- 
tithesis of  sound  marketing  policy.  So  adventurers  and 
romanticists  who  want  to  "take  a  chance"  prefer  spasmodic 
to  regular  distribution.  They  see  possibilities  of  large  gains 
here  and  there  and  fail  to  see  at  what  cost  to  the  industry 
these  gains  are  purchased. 

It  is  the  old  difficulty  between  individual  advantage  and 
the  general  welfare  that  arises.  One  grower  or  shipper 
might  profit  by  chaotic  and  fluctuating  markets  but  nothing 
more  disastrous  for  the  industry  as  a  whole  could  be  sug- 
gested. The  very  possibility  of  obtaining  these  exceptional 
prices  at  all  depends  on  the  existence  of  the  industry,  and 
the  existence  of  the  industry  is  dependent  on  stability  of 
marketing  methods.  As  long  as  ignorance  or  selfishness 
or  speculative  mania  cause  certain  individuals  to  seek  per- 


214  COOPERATIVE    MARKETING 

sonal  advantage  at  the  expense  of  the  general  welfare  on 
which  also  their  personal  advantage  ultimately  depends,  so 
long  we  shall  wait  in  vain  for  a  completely  organized  sys- 
tem of  food  distribution.  To  the  present  writer,  this  diffi- 
culty appears  to  be  insurmountable.  Those  with  public 
spirit  and  foresight  have  to  continue  to  bear  the  burden 
for  their  irresponsible  fellows. 

The  unquestionably  correct  assumption  that  the  exchange 
member's  situation  is  superior  to  that  of  his  independent 
competitor  is  based  on  two  facts :  ( i )  The  prices  which 
the  exchange  receives  for  its  fruit  are  available  to  anybody 
and  are  a  matter  of  common  knowledge,  whereas  the  prices 
of  most  independent  concerns  are  not  available.  There- 
fore, it  is  easy  to  surmise  that  the  independents  are  not 
eager  for  a  comparison  of  results.  (2)  If  the  prices  which 
individual  growers  receive  from  the  non-exchange  channels 
of  marketing  are  entirely  satisfactory,  why  do  they  con- 
tinually join  the  exchange  ranks?  What  possible  motive 
would  cause  the  transfer  if  the  prices  which  they  are  re- 
ceiving should  be  higher  than  those  of  the  exchange,  since 
they  can  easily  ascertain  the  latter  before  applying  for  the 
privileges  of  membership? 

Though  some  growers  do  not  see  fit  to  adopt  the  coopera- 
tive method  of  maintaining  the  citrus  market,  they  are 
treated  with  all  courtesy  by  members  and  associations. 
Antagonism  and  animosity  could  certainly  do  no  good,  and 
courtesy  may  lead  to  cooperation.  Moreover,  in  an  indirect 
way  non-members  are  of  use  in  helping  to  work  out  the 
problems  of  cooperation,  for  they  make  necessary  loyalty 
and  internal  harmony  among  the  members  and  are  a  stim- 
ulus to  never  ceasing  endeavor  toward  progressiveness  and 
efficiency  on  the  part  of  the  cooperative  organization. 

But  some  growers  are  not  content  with  mere  aloofness. 
They  adopt  aggressive  tactics,  and  unstable  minds  are  likely 


THE  EXCHANGE  AND  THE  MARKET  215 

to  be  influenced  by  attacks  on  any  organization,  no  matter 
how  unjustifiable  the  attacks  may  be.  Here  is  an  example: 
After  explaining  how  low  prices  for  citrus  fruits  during 
1914-15  were  not  attributable  to  the  war  or  the  tariff  or 
general  business  depression,  one  grower  asks : 

Who  is  to  blame?  The  method  of  marketing.  Who  is 
responsible  for  the  method  of  marketing?  The  California 
Fruit  [Growers]  Exchange.  .  .  .  Mr.  Exchange  Grower: 
At  present  you  are  standing  in  the  doorway,  right  in 
your  own  light,  and  you  shadow  every  other  man  in  the 
business.^ 

The  question  arises,  therefore,  whether  this  elaborate 
cooperative  organization  that  has  been  so  painfully  evolved 
i  likely  to  be  permanent,  or  whether  it  is  simply  an  in- 
teresting industrial  experiment  that  will  certainly  succumb 
as  soon  as  adversity  arises  and  may  even  fall  of  its  own 
weight.  Cooperation  among  the  citrus  growers  was  not 
the  child  of  logic  and  a  priori  reasoning  about  a  scientific 
system  of  marketing  but  of  necessity,  and  necessity  has 
thus  far  maintained  it.  With  the  extension  of  cooperation 
beyond  marketing  into  packing  house  and  orchard  supplies, 
insurance  and  by-products,  and  with  cooperation  the  start- 
ing point  in  dealing  with  the  large  public  policies  affecting 
the  industry,  the  cooperative  principle  is  probably  more 
deeply  ingrained  in  the  citrus  industry  than  ever  before. 
Never  was  the  exchange  system  in  a  sounder  or  more 
flourishing  condition  than  it  is  today.  Those  in  the  best 
position  to  know  are  positive  that  cooperation  has  come  to 
stay,  because  it  has  "made  good'';  indeed,  that  it  has  done 
things  that  the  old  systems  did  not  and  could  not  do.  An 
excellent  summary  of  the  present  status  of  cooperation  in 
the  citrus  industry  is  given  by  Powell : 

2MacRac:  "Citrus  Facts  as  Viewed  !)y  a  Grower,"  in  Rizcrsidc 
Enterprise,  May   20,    1915. 


2i6  COOPERATIVE    MARKETING 

At  first,  the  growers  were  inexperienced  in  meeting  the 
attacks  of  those  who  were  opposed  to  cooperation  among 
the  producers.  Powerful  financial  interests  of  various  kinds 
were  arrayed  against  them  and  were  organized  to  oppose 
them.  Vicious  attacks  were  made  on  the  integrity  of  the 
officers.  The  results  obtained  by  the  associations  were  be- 
littled, the  grower's  association  contract  was  assailed  in  the 
courts,  and  the  methods  of  marketing  the  fruit  were  at- 
tacked. The  most  determined  efforts  were  made  to  show 
that  the  growers'  organizations  were  illegally  formed. 
Finally  the  growers  combined  with  the  buyers  at  one  time 
to  market  the  entire  crop,  but  this  incongruous  combination 
of  producers  and  dealers  was  dissolved  at  the  end  of  a 
year  and  a  half. 

The  history  of  the  citrus  industry  in  California  is  largely 
a  record  of  the  progress  in  the  cooperative  handling  and 
distribution  of  the  crop  by  the  producer  and  his  determina- 
tion to  receive  an  equitable  share  of  the  value  of  the  labor 
expended  in  its  production.  The  battle  has  been  won;  the 
cooperative  principle  is  firmly  fixed.  It  is  the  balance  wheel 
that  gives  stability  to  the  industry  and  to  the  relations  that 
exist  between  it  and  the  agencies  with  which  it  transacts 
business. 

Fewer  serious  efforts  are  made  now  to  break  down  the 
cooperative  principle  among  the  growers.  New  schemes  of 
fruit  marketing  are  proposed  from  time  to  time,  the  or- 
ganizations are  frequently  attacked  in  the  courts  under  one 
guise  or  another,  and  other  insidious  movements  are  started, 
all  having  in  view  the  possible  splitting  open  of  the  coopera- 
tive organizations  and  a  return  to  the  methods  of  marketing 
which  would  destroy  the  systematic  distribution  and  mar- 
keting now  in  operation  and  reinstate  the  chaotic  specula- 
tive methods  that  were  formerly  in  vogue.  The  cooperative 
movement  in  the  citrus  industry  is  the  result  of  a  slow, 
painful  evolution,  and  the  grower  does  not  appear  to  be 
deceived  by  these  efforts,  no  matter  how  ingeniously  and 
artfully  they  are  conceived.^ 

3  Powell :  "Cooperation  in  the  Handling  and  Marketing  of  Fruit," 
from  the  Yearbook  of  the  Department  of  Agriculture,  1910,  p.  405. 


THE  EXCHANGE  AND  THE  MARKET   217 

Admitting  that  cooperative  marketing  is  on  a  solid  basis 
in  the  citrus  industry,  are  there  any  peculiar  circumstances 
that  have  contributed  to  this  result?  And  is  cooperation 
applicable  where  such  conditions  do  not  obtain?  The  citrus 
industry  of  California  is  unique.  It  is  restricted  to  an  area 
that,  while  not  small,  is  yet  much  smaller  in  extent  than  that 
devoted  to  most  agricultural  products;  most  problems  of 
producing  and  marketing  apply  to  all  the  growers  alike; 
there  is  practically  no  local  market,  and  almost  all  fruit 
must  be  shipped  thousands  of  miles,  thereby  necessitating 
a  more  elaborate  marketing  organization  than  is  required 
for  most  agricultural  commodities.  Probably  more  im- 
portant still,  the  citrus  growers  are  an  exceptionally  intelli- 
gent and  progressive  group.  Even  under  these  favoring 
conditions  cooperation  was  almost  literally  forced  on  them, 
and  while  cooperative  effort  has  undoubtedly  proved  a  suc- 
cess, it  has  nevertheless  failed  to  attract  a  considerable 
number  of  growers.  With  all  the  conditions  favorable, 
organization  has  not  become  complete  and  universal. 

Therefore,  when  the  producing  area  is  widely  scattered, 
or  when  the  product  cannot  be  standardized,  or  when  mar- 
keting is  mostly  local  in  character,  complete  organization 
of  the  marketing  machinery  would  certainly  be  much  more 
difficult.  But  even  when  a  highly  integrated  system  is  im- 
possible, local  cooperative  associations  for  handling  com- 
mon problems  of  production  or  transportation  or  finance 
are  practicable.  Local  producers  may  cooperate  for  the 
standardization  of  their  own  local  i)roduct.  They  may 
profitably  combine,  also,  for  the  erection  and  maintenance 
of  common  cold  storage  facilities.  Then  these  local  units 
could  have  more  or  less  intimate  relations  with  similar  units 
in  other  districts,  even  if  a  general  and  comprehensive  or- 
ganization could  not  be  effected. 

Whether  the  cooperation  contemplated  be  local  or  gen- 


2i8  COOPERATIVE    MARKETING 

eral,  agricultural  industries  can  learn  much  from  the 
experience  and  achievements  of  the  citrus  growers  of  Cali- 
fornia. The  problem  of  food  distribution  is  not  completely 
solved  by  cooperative  marketing,  but,  allowing  for  the  ne- 
cessary adjustments  according  to  varying  conditions,  the 
California  system  exhibits  many  improvements  over  pre- 
vious methods  and  is  susceptible  of  a  wide  application. 


INDEX 


Abrasion,  36 

Accessibility  of  officers,  144 

Accounts,   86-87 

Acreage,  citrus,   iQ-22 

Administration,  81 

Advertising,   135,   137,  161-65 

Advertising,   cost,    165 

Affiliated  organizations,   189-206 

Agencies,   136-38 

Agent,   184 

Agents,   135,  171-72 

Agents,  accountability  of,   173 

Agents,  duties  of,  172 

Agents,  exclusive  lines,   172-73 

Agents,  power  over  sales,   179 

Agricultural   specialty,  49 

Amendments,   66 

Annual    meeting,    description    of, 

74-78 
Appeals,  66 
Apples,  price  of,  6 
Applicability  of  exchange  system, 

207-18 
Arizona,   23 

Articles  of  incorporation,  60-61 
Assessment,  69-71,   138 
Association,  affiliations  of,  62 
Association,  contract  with  district 

exchange,   116-18 
Association,  control  over  crop,  92- 

99 
Association,  crop  agreement,  117 
Association,  flexibility,   112 
Association,    lirjuidated    damages, 

118 
Association,  manager,   annual   re- 
port, 75-77 
Association,  packing,  59-113 
Association,   size  of,   107-08 
Ateliers,  i 

Attacks  on  cooperation,  2I5-I() 
Auction  charges,   138 
Auctions,  9,   177,   179 
Australian  orange,   18 
Authority  over  sales,  180 


B 

Bahia,    17 

Benefits  of  cooperation,  i6g-88 

Benefits  of  exchange,  214 

Board  of  representatives,  140 

Bond,  138,  172 

Books,  64,  136 

Booth,  Charles,  4 

Boundaries  of  associations,  63,  73- 

74 
Box  shooks,  189-90 
Brands,  66,  100-01,  124,  157,  164-65 
Brazil,   17 

Breadth  of  view,  141-43 
Brokerage,  65,   119-20 
Brotherhoods,    I 
Bud  selection,   154-55 
Bulletin,    175-76,    184 
Bureau  of  information,  202 
Business  difficulties  of  farmers,  2 
Business  men,  cooperation  among, 

8 
Business  methods  for  farmers,  9 
Buyers,   agreements  among,  43-.H 
By-laws,  61-66 
By-products,  196-98 


California,  citrus  area,  19 
California,  citrus  pro<luction,  23 
California,  cooperative  law,   59-<>0 
California,  early  marketing  condi- 
tions, 16 
California  Fruit  Agency,  55-57 
California     Fruit     (irowcrs     Kx- 

changc,  33,  57.-58,   i8()-90 
California     Fruit     (irowers     Ex- 
change, contract,   134-40 
California     Fruit     (irowers     Ex- 
change, coiUrol  over  shipments, 
i8i 
California      Fruit     (Irowers     Ex- 

cliantie,  directors,   132 
California      h'rnit     firowers     Ex- 

cliange.   marhinery.    140 
California      hViiit      (Irowers      Ex- 
change,  management,   132 


219 


220 


INDEX 


California  Fruit  Growers  Ex- 
change, meetings,   140-41 

California  Fruit  Growers  Ex- 
change, membership,  134 

California  Fruit  Growers  Ex- 
change, officers,   144-45 

California  Fruit  Growers  Ex- 
change, organization,  132-34 

California  Fruit  Growers  Ex- 
change, ownership  of,  132-33 

California  Fruit  Growers  Ex- 
change, price  control,  181 

California  Fruit  Growers  Ex- 
change, reincorporation,  131 

California  Fruit  Growers  Ex- 
change, representation  in,  134 

California  Fruit  Growers  Ex- 
change, responsibility,  139 

California  Fruit  Growers  Ex- 
change, significance  of,   131 

California  Fruit  Growers  Ex- 
change, stock  ownership  in,  132 

California  Fruit  Growers  Ex- 
change, voting  power,  134 

California,  growth  of  citrus  indus- 
try,  16 

California,  introduction  of  orange 
into,  16 

California,  railroad  connections,  16 

California,   school   system,  25 

California,  State  Board  of  Equal- 
ization,  19 

Capital,  68-71,  132 

Capitalization  of  land  incomes, 
162-63 

"Car,"  definition  of,  42n,  139 

Cars,  obtaining  of,  124 

Carver,  T.  N.,  25,  49 

Cash  sales,  57,  100,  151-52 

Central  exchange,  authority  of,  133 

Central  exchange,  organization, 
131-46 

Centralization,  59,  113 

Certificate  of  membership,  61-62, 
72 

Chamblin.  T.  H.  B.,  47 

Chapin,  R.  C,  4 

Charges,  137 

Charter,  60-61 

Chase,  Frank,  159 

China,  17 

Cities,  flow  of  population  toward,  i 

Citric  acid,  196-97 

Citron,  15 

Citrus  acreage,  19 


Citrus  area,  classification,  20-21 

Citrus  area,  location,  20 

Citrus  association,  definition  of, 
112 

Citrus  counties,   rank,  22 

Citrus  crop  of  U.  S.,  18-19 

Citrus  crop  of  world,  18 

Citrus  crop,  proportion  sold  co- 
operatively, 41,  207-08 

Citrus  experiment  station,  201 

Citrus  groves  as  homes,  25 

Citrus  groves,  size,  24 

Citrus  groves,  value,  23 

Citrus  growing,  comparison  with 
general  farming,  25 

Citrus  growing,  motives  to,  25-26 

Citrus  industry,  expansion,  150-51 

Citrus  industry,  general  descrip- 
tion of,  15-40 

Citrus  industry,  number  in,  23-24 

Citrus  industry,  organization  of 
producers,  92-113 

Citrus  industry,  origin,  extent  and 
value,  15-40 

Citrus  industry,  special  circum- 
stances of,  217-18 

Citrus  industry,  varied  conditions 
in,  16 

Citrus  laborator}%  201 

Citrus  marketing,  classification, 
207 

Citrus  marketing,  early  history, 
41-58 

Citrus  prices,   169-71 

Citrus  production,   161-64 

Citrus  production,  relation  to 
speculation,   162 

Citrus  Protective  League,  19,  23, 
37,  154,  185,   198-206 

Citrus  Protective  League,  accomp- 
lishments, 200-01 

Citrus  Protective  League,  bulle- 
tins, 202 

Citrus  Protective  League,  cost  of, 
202 

Citrus  Protective  League,  expen- 
ses, 199 

Citrus  Protective  League,  func- 
tions,  198-99 

Citrus  Protective  League,  mem- 
bership, 199 

Citrus  reference  library,  202 

Citrus  trust,   172 

Claims,  134-35.  139-40,  i5-'-54,  I74- 
75 


INDEX 


221 


Claremont    Fruit    Growers    Asso- 
ciation, 47 
Coastal  district,  21 
Collections,  134,  151-52,  185 
Commerce  Court,  203-05 
Commission,   44-45 
Commissions,   138,   150 
Competition,  137,  182-83 
Competitive  cooperation,    13,   178- 

79 
Condition    of    exchange     system, 

215-16 
Constituent    factors    of    exchange 

system,   59 
Constitution  of  exchanges,  79-91 
Consumers'  cooperation,  9 
Consumers'  dollar,  apportionment 

of,  3 
Consumers'  leagues,  3 
Consumers'  suspicion  of  combina- 
tions, 7 
Consumption,   135 
Contract,  67,  134-40 
Controversies,    72-7;^ 
Cooperation,  an  attitude,  98-99 
Cooperation  and  dividends,   11 
Cooperation    and    food    distribu- 
tion, 217-18 
Cooperation,  appeal  to  self-inter- 
est, 8 
Cooperation,  benefits  of,  169-88 
Cooperation,  savings  of,  147-51 
Cooperative  buying,  148,  189-94 
Cooperative  frost  protection,  206 
Cooperative  fumigation,  206 
Cooperative  irrigation,  206 
Cooperative  marketing,  183-85 
Cooperative      marketing      among 

farmers,  10 
Cooperative      marketing      among 

manufacturers,    10 
Cooperative    marketing,    attention 

paid  to,  I 
Cooperative  marketing,  definitions, 

ID 

Cooperative    organization,    power 

of,  204-05 
Cooperative  organizations,  capital 

of,    II 
Cooperative    organizations,    types 

of,    II 
Cooperative  philosophers,  i 
Cooperative  picking,  65,  93-95.  ^06 
Cooperative  storage,   10 


Cooperative  system,  summary,  146 

Cost  of  living,  1-2 

Cost    of    marketing,    134,    147-51, 

185-86 
Cost  of  packing  house,  69-70 
Cost  of  production,  37-39 
Cover  crop,  28 
Crop  buyers,  32-34 
Cultivation,  28 
Curing,  37 

D 

Damages,  62,  65,  123-24 

Dealers  service,  166 

Death     rate     among     cooperative 

enterprises,  i 
Debts,  64,  85 
Decay,  44-46,    155-57 
Deliveries,  quantities,  96-99 
Delegation  of  power,   119,   125-26, 

135 
Democracy,   132-33,   141-42 
Democracy,  industrial,  11 
Democratic  control,  12 
Democratic  organization,  59-78 
Description  of  activities,  82-86 
Desertions,  cause  of,  212-13 
Dczell,  E.  G.,  56 
Diet,  properly  balanced,  6 
Directors,  77-78 
Directors,  duty  of,  64 
Directors,  election  of,  63-69 
Directors,  meetings.  82 
Directors,  organization,  79 
Directors,  payment  of,  82 
Direct  selling,  wastefulness  of,  3 
Discrimination,  88 
Discussion,   76-77 
Distribution  of  risk,  54-55 
Distributive     system     and     social 

welfare,  6 
District  exchange,  authority  over 

sales,  119 
District  exchange,  comparison  with 

selling  on  comnission,  121-23 
District     exchange,     constitution, 

114 
District   exchange,   contract,    116- 

18 
District  exchange,  cost,  120 
District  exchange,  distribution   of 

proceeds,   117-18 
District  exchange,  expenses,  117 
District  exchange,  function,  114 


222 


INDEX 


District  exchange,  liability  for 
sales,  1 17-18 

District  exchange,  limitations,  139 

District  exchange,  management, 
116 

District  exchange,  membership, 
114-15 

District  exchange,  method  of  sell- 
ing, 114 

District  exchange,  organization, 
1 14-16 

District  exchange,  power  of,  125- 

29  ,    .  . 

District  exchange,  relation  to  in- 
dustry, 129-30 

District  exchange,  responsibility 
of,  121 

District  exchange,  selling  author- 
ity,  125-26 

District  exchange,  summary,  116 

District  exchange,  voting  power, 
115 

District  exchange,  withdrawal 
from,  118 

District  exchange,  reports,  76-77 

District  manager,   184 

District  manager,  duties  of,  128-30 

Diversion,  174,  178-79,  184 

Dividends,  11,  71 

Dividends,  danger  of,   13 

Division  manager,  172 

Division  of  proceeds,   12 

Division  of  territory,  172 

Dreher,  P.  J.,  47-48,  5^ 

Dry  farming,  28 


Early  citrus  plantings,  16 

Early  organizations,  47-48 

Earnings  and  standard  of  living,  4 

"Economic  man,"  7 

Efficiency,  4,   145 

"Eight  to  one"  standard,  160 

Elasticity  of  market,  54-55 

Elections,  69 

Eligibility  for  membership,  87-88 

Equipment,  67-68 

Essential  oils,  196-9" 

Estimates,  83-84,   139 

Europe,    introduction    of    orange 

into,  17 
Evaporation,  28 
Exchange    By-products   Company, 

196-98 


Exchange  system,  misconceptions 
about,  59 

Exchange  system,  problems,  207- 
18 

Exchange  system,  similarity  to  la- 
bor organizations,  59 

Exchange  system,  summary,  206 

Exclusion,  88-89 

Exclusive  agency,  64-65 

Exclusive  agreements,  136 

Expansion  of  demand,  161-68 

Expenditures,  64 

Expenses,  67,  136-38 

Expenses,  apportionment  of,  62, 
65,  119-20 

Expulsion,  62,   72-73 

Extension  of  cooperation,  215 

Extension  of  market,  51 


Farmers,  conservatism  of,  13 

Farmers,  socialization  of,  7-8 

Fertilization,  28-29 

Field  department,  157,  161-62,  165 

Financing,  68-71 

Fire  insurance,  195-96 

First  home  of  orange,  17 

Florida,  22-23 

F.  o.  b.  prices,  169-70 

F.  o.  b.  sales,   179-80 

F.  o.  b.  selling,  56-57 

Food,  average  expenditure  for,  4 

Food,  cost  of  distributing,  5 

Food  distribution  as  field  for  co- 
operation,  1-15 

Food,  increase  in  cost  of,  2 

"Forty-niners,"  16 

Freight,   39 

Frost,  29-32 

Frost  devices,  164,  201 

Frosted  fruit,  85-86,  158-59,  201 

Fruit  Growers  Supply  Companj-, 
62-63,  7Z,  154,  190-94 

Fruit  Growers  Supply  Company, 
Capitalization,   190-93 

Fruit  Growers  Supply  Company, 
cost,   194 

Fruit  Growers  Supply  Company, 
transactions,    193-94 

Fruit,  relation  to  health,  6 

Fruit  year,  admission  during,  88- 
89 

Fruit  year,  compulsion  during,  90 

Fruit  year,  description  of,  82-85 


INDEX 


-'-3 


Fumigation,  31,  197 
Functions  of  middlemen,  166-67 
Funds,  depositing  of,  66 
Fungous  diseases,  29 


Japan,  citais  crop  of,   lS-19 
Japanese,  35 
Jobbers,  3,   165-67 


Glenwood  Mission  Inn,  18 

Grades,  53-54 

Grading,  36,  65-66,    105-07 

Grapefruit,  15 

Grievances,  ^(i-T/ 

Growers,  23-24 

Grower-shippers,  208 

Growth  of  exchange  system,   187- 


H 
Habit,  effect  on  marketing,  7 
Hard-pan,  26 
Hauling,  36 

Health,  relation  to  high  prices,  3 
Heating  devices,  32 
High  prices,  1-3 
History  cards,   175-76 
Home  hamper,  3 
Humus,  28 
Hydrocyanic  acid  gas,  31 


Immature  fruit,   158-60 
Improvement  of  product,  154-60 
Independent   shippers,    182,   210-12 
Individual  account  method,  12 
Individualism,  7,  213-14 
Individualism  vs  cooperation,  98- 

Individual  shipments,  risk  of,  loi- 

02 
Inefficiency,  penalization,  67-68 
Inequality,  68-69 
Information,  136,  138,  172 
Information   service,  50-51 
Initiative,  68 
Injured  fruit,  85-86 
Inland  district,  21 
Irrigation,  26-28 
Insects,  29-30 
Inspectors,  174.  184 
Insurance,   195-96 
Interstate  Commerce  Commission, 

203-05 
Investment,  69-70 
Italy,  citrus  crop  of,  18-19 


King,  C.  L.,  5 


Land  values,  2,  162-63 

Laranga  selecta,  17 

Large  scale  enterprise,  51-52 

La  Verne  Orange  Growers  Asso- 
ciation, 87,  92,   113 

Legal  department,   135,   185,  203 

Legal   structure,   59-60 

Lemon  rate  case,  200-01,  203-05 

Lemons,  acreage,  19-20 

Lemons,  cost  of  picking  and  pack- 
ing, 109 

Lemons,  cost  of  production,  37-39 

Lemons,  curing,  109 

Lemons,  freight  rate,  149 

Lemons,  ratio  to  oranges,  19-20 

Lemons,  season,  35 

Lemons,  times  of  picking,  108-09 

Lime,  15 

Liquidated  damages,  65-67,  90-91, 
136-37 

Loans,  71 

Los  Angeles,  6,  16 

Los  Angeles,  office,  140,  172 

Losses,  139,  152 

Louisiana,  23 

M 

Machiner}-,   148 

Management,  2,2, 

Manager,  63,   144:45 

Manager,  authority  over  grades, 
106 

Manager,  powers,  80 

Manager,  proper  method  of  select- 
ing, 81-82 

Manager,  qualities,  80-81 

Manager,  salary,  80 

Manager,   selection,   79 

Managers,      competition      among, 

178-79. 
Market  information,  0 
Market   information   service,    176- 

78 
Market  reports,  173-74 
Marketing  efficiency,  o 
Marketing,  home  hamper,  3 


224 


INDEX 


Marketing  and  individualism,  7 
Marketing   machinery,    171-88 
Marketing,  many  plans  not  feasi- 
ble, 3 
Marketing  policy,  97-99,  180 
Marketing  policy,  relation  to  esti- 
mates, 83-84 
Marketing  system,  resume,  183-85 
Mechanical  injuries,  155-56 
Meeting,    annual,    description    of, 

74-78 
Meetings,  63,  74,  140-45 
Members,  control  over  marketing, 

127 
Members,  power  over  picking,  92- 

94 

Membership,  61-62 
Membership  fee,  62 
Membership,  forfeiture  of,  64-65 
Membership  requirements,  64 
Membership,  transfer  of,  62,  71-72 
Methods  of  selling,  cost,  120-21 
Mexicans,  35 

Monopolistic  practices,  208-09 
More,  L.  B.,  4 
Municipal  market,  3 
Mutual  insurance,  195-96 
Mutual  Orange  Distributors,  199 

N 
Navel  orange,  first  planting,  18 
Navel  orange,  superiority,   18 
Navel,  Washington,  17 
Necessity   for  cooperation,  215-16 
New  markets,  165-66 
New  members,  88-89 
Non-bearing  acreage,   161-62 
Non-cooperative  sales,  208 
Non-exchange  cooperation,  208 
Non-members,  treatment  of,  214- 

15 

Non-profit  basis  of  cooperation,  13 
Non-profit  organization,  59-60 
Non-shipping-members,   100 

O 

Officers,  144 

"One  man  vote,"  12-13,  68-69 
Opposition  to  exchange,  214-15 
Orange    Growers    Protection   Un- 
ion, 41,  46 
Oranges,  acreage,  19-20 
Oranges,  cost  of  production,  37-39 
Oranges,  freight  rates,  148-49,  200 


Oranges,    introduction    into    Cali- 
fornia,  16 
Oranges,  picking,  33-36 
Oranges,  ratio  to  lemons,  19-20 
Oranges,   shipments,  42 
Oranges,  varieties,  17 
Orange  trust,  59 
Orchard  supplies,  191-92 
Organization  and  progress,  202-03 
Original  trees,  18 
Output,  41-42 

Overhead  expenses  of  retailers,  5 
Oversupply,  197-98 


Pachappa  Orange  Growers  Asso- 
ciation, 47-48 

Package,  135,  154-55.  160-61 

Packing,  36-37 

Packing  and  marketing,  127-28 

Packing  association,  59-113 

Packing  costs,  147-48 

Packing  house,  cost,  69-70 

Packing  materials,    191-92 

Packing  profits,  148 

Palestine,  citrus  crop,  18-19 

Patronage  dividends,   193 

Payment,  66,  139 

Payne  Aldrich  Act,  201 

Peaches,  price  of,  6 

Penalties,   90-91 

Performance  card,  33 

Perishables,  second  quality,  5 

Permanency  of  cooperation,  215- 
16 

Phalanxes,  i 

Picking,  33-36,   155-56 

Picking,  control  over,  80,92-99 

Picking  crew,  35 

"Picking  to  size,"  35 

Place  distribution,  10 

Pomelo,  15,  22 

Pooling,  12,  124 

Pooling,  typical  case  of,  109-11 

Pools,  66,   101-104,   184 

Pools,  an  insurance  measure,  loi- 
02 

Pools,   flexibility,    103 

Pools,  organization  of,  102-04 

"Postage  stamp"  freight  rate,  203 

Powell,  G.  H.,  II,  36,  60,  156-58, 
171,  208,  215 

Pre-cooling,  149-50 

Pre-cooling  case,  205-06 

Pre-icing,    149-50 


INDEX 


^-D 


Prevailing  winds,  21 

Price  and  cost  of  production,  170 

Price  determination,   182-83 

Prices,  138 

Prices,  fluctuation,  43,  210 

Prices,  reflected  in  land  values,  2 

Price  reporting,  212-13 

Principles   of   cooperation,    11- 14 

Proceeds,  67,  119 

Proceeds,    apportionment    of,    12, 

65-66,   185 
Producers,  organization  of,  92-113 
Profits  of  retailers,  5 
Progressiveness,   142 
Propogating   gardens,    17 
Prorating,  12,  65-66 
Proxies,  63 
Pruning,  31 

Publicity,  86-87,  141-42,  214 
Purchasing  power  and  health,  3 
Purposes   of   incorporation,   61 
Purposes  of  organization,  134-40 


Quorum,  63 


Q 


R 


Railroad  rates,  148 

Rainfall  in  California,  27 

Recall,  63,  68 

Recall  of  judicial  decisions,  66,  68, 

112 
"Red  Ball,"   164-65 
"Red  ink,'*  46-47 
Red  spiders,  31 
Referendum,  68 
Refrigeration,  39.  45,  200,  205 
Refrigeration  costs,  149 
Refund,   192 

Refusal  to  cooperate,  209-10 
Regularization,   148 
Rejected  fruit,  86 
Rejection  of  fruit,  64-65 
Reports,  75-77,  174-/7,  184 
Reserved   rights,    137 
Responsibility  for  grade,  52-54 
Results  of  cooperation,    147-68 
Retailer,    high    profits    and    small 

sales,  5 
Retail   prices,    169-70 
Retailers,  3,  165-67 
Returns,  basis  of,  67-68 
Risk,  44,  54-55 


Riverside,  18 
Roosevelt,  Theodore,  18 
Routing,  174 
Rowntree,  B.  S.,  4 


Salaries,  64.  80,  135,  137,  172-73 

Sale  of  membership,  62 

Sales,  66,  71-72,  139 

Sales  managers,  176 

Sales  practices,  119 

San  Diego,  21 

San  Joaquin,  21 

Santa  Barbara,  21 

Saunders,  William,  17-18 

Savings  of  cooperation,   147-5 1 

Scale  insects,  29 

Scarcity  profits,  211-12 

Scientific  agriculture,  2 

Scientific   marketing,    181 

Season,  lengthening  of,   167-68 

Seedling  varieties,   15-17 

Self  interest,  8,  14 

Selfishness,  143 

Selling,  39 

Selling  agency,   114-30 

Selling  arguments,    i()7 

Selling  on  commission,    114-30 

Service  of  non-members,  214 

Services  demanded  of  retailers,  5 

Shamel,  A.  D.,  154 

Shares,  69 

Shipping  agreement,   123 

Shipments,  41-4^,   148,   176 

Size  of  citrus  industr>',  24 

Sizes,  84,  95-96 

Social  welfare  and  distributive 
system,  6 

Soil,  26 

Southern  California  Fruit  Ex- 
change, 48,  55-5>^ 

Southern  Pacific,  16 

Spain,  citrus  crop  of,   18-19 

Special  meetings,  63 

Specialty  marketing,  49-50 

Speculation,  0,  43 

Speculation  in  land,  162 

Speculative  shippers,  46-47 

Spraying,  31 

Standard  grades,  5 

Standard   of   living,   4 

Standardization,  5--54.  100-101,  157 

Standards,   164-65 

Statements,   138 


226 


INDEX 


Statistics,  202 

Stock  corporations,  dangerous  for 

cooperation,  11 
Stock  dividends,  193 
Stock  ownership,  68-69 
Storm  water,  28 
Strcightoff,  F.  H.,  4 
Subsistence,  minimum  of,  4 
Success,  causes  of,  217-18 
"Sunkist,"  132,  157,  164-65 
Supplies,  62-63 
Supplies,  purchase  of,  82-83 
Sweating,  36,  159-60,  195 


Tariff,  201 

Telegraph  service,  176-77 

Temperature  in  citrus  area,  21 

Tenancy,  26 

Texas,  23 

Thermal  belt,  20 

Tibbetts,  Mrs.  L.  C,  18 

Timber  tract,   190-91 

Time  element  in  marketing,  10 

Time,  reduction  of  in  marketing, 
158 

Traffic  department,  174-75 

Transfer  of  membership,  62 

Transfer  of  property,   112 

Transfer  of  stock,  87-88 

Transmission  of  proceeds,  151-52 

Transportation,  45-46 

Transportation    difficulties,    54 

Travelling  salesmen,   165-66 

Treasurer,  6;^ 

Tulare,  21-22,  159 

Types  of  cooperative  organiza- 
tion,   lO-II 


U 
Uiulcrnourishmcnt,    4 
Underwood  Act,    'Oi 
Unfair  practices,   182 
United  States  Board  of  Food  and 

Drug  Inspection,   159-60 
United  States,  citrus  crop  of,  18- 

United  States  Dcpt.  of  Agricul- 
ture, 17,  154-57,   160 

United  States  Supreme  Court, 
204-05 

University  of  California,  29 

V 
Valencia  Late,  21,  34 
Value  of  exchange  system,  147-68 
Ventilation,  45 
Ventura,   21 
Vetch,  28 
Voting,  61,  63,  68-69 

W 
Wallschlaeger,  F.  O.,  19 
Washington,  17 
Washington  navel,   17,  34 
Water   supply,  27-28 
Welfare  and  high  prices,  3 
White  fly,  201 
Windfalls,  85-86 
Window   displays,    167 
Withdrawal,    65,    99-100,     124-25, 

136,  145 
Wolfskin  grove,  16 
Woodford,  B.  A.,  151 

Y 
Yields,  39 

Z 
Zone  picking,  35 


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